Advances at each stage
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Borrower must show
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Ratio and cost of advance
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Conditions
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Financing of margincalls
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1.Document negotiation
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Real function, i.e. adds value.
Track record. (Defaults are most likely to occur in the first 3 to 5 years of
new operations.)
Quality management.
Understanding of the coffee business.
Deals are correctly structured.
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Ratio or percentage of advance: highest.
Interest rate: lowest.
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Sold to approved buyer.
Documents and/or payment via bank.
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Exposure has been hedged, or PTBF sale has been 'fixed'.
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2. Pre-shipment
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Appropriate business plan and reporting systems.
In-house financial and volume limits.
Clear document flows, proper stock rotation.
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Ratio: lower.
Cost: higher.
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Pre-sold to approved buyer or hedged.
Collateral manager.
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Depending on package and borrower's 'book'.
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3. Export processing
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Own capital.
Visible, permanent and pledgeable assets.
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Ratio: lower again.
Cost: higher again.
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Pre-sold to approved buyer or hedged.
Collateral manager.
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Depending on package and borrower's 'book'.
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4. Interior buying
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Adequate warehousing and insurance.
Access to collateral management.
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Ratio: lowest or even nil.
Cost: highest.
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Pre-sold to approved buyer or hedged.
Collateral manager.
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Depending on package and borrower's
'book'.
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