UPS Capital offers small businesses new global trade finance solution (U.S)

UPS Capital, the financial services arm of UPS, is offering a new service – UPS Capital Cargo FinanceSM – enables small U.S. importers to use their in-transit UPS shipments as collateral for loans, reducing the need to rely on paper-intensive letters of credit to finance international trade transactions.

UPS Capital Cargo Finance is designed for U.S. companies with annual revenues up to USD 50 million that import 1-to-10 ocean or air freight containers of goods per month.

Most global trade transactions for small companies are financed via letters of credit or cash in advance, with trading on open account terms typically available only to large companies. While effective, letters of credit are time-intensive and costly. Cash-in-advance transactions can strain cash flow for small companies. Additionally, traditional financial service companies may be hesitant to lend against goods that are in-transit or housed in a foreign location, leaving few options for small businesses that want to participate in global trade.

UPS Capital, the financial services arm of UPS, is offering an easier and more efficient way for small companies to finance their trade transactions with international suppliers.

The new service – UPS Capital Cargo FinanceSM – enables small U.S. importers to use their in-transit UPS shipments as collateral for loans, reducing the need to rely on paper-intensive letters of credit to finance international trade transactions.

UPS Capital Cargo Finance is designed for U.S. companies with annual revenues up to USD 50 million that import 1-to-10 ocean or air freight containers of goods per month. Here’s how it works:
– A U.S. importer places an order for goods with an international supplier.
– Once the supplier fulfills the order and the bill of lading covering the goods is in UPS’s possession, the importer pays 50 pct of the cost to UPS Capital and UPS Capital then pays 100 percent of the cost of the goods to the international supplier.
– The U.S. importer then pays back UPS Capital according to the terms of the loan (usually within 60 days).

Most global trade transactions for small companies are financed via letters of credit or cash in advance, with trading on open account terms typically available only to large companies. While effective, letters of credit are time-intensive and costly. Cash-in-advance transactions can strain cash flow for small companies. Additionally, traditional financial service companies may be hesitant to lend against goods that are in-transit or housed in a foreign location, leaving few options for small businesses that want to participate in global trade.

“Because UPS manages the shipment of the goods and provides visibility, UPS Capital is able to do something banks and other financial services companies may not be willing to do – provide financing earlier in the transaction,” said Robert J. Bernabucci, president of UPS Capital. “Not only are payments to suppliers accelerated, but transit times for the receipt of goods also may be improved. The true value of an efficient supply chain can only be realized when the physical movement of goods is married with the efficient funding of those goods.”