OVERDRAFT (OD)
A type of credit facility granted to the eligible current account holder. The borrower is allowed to issue cheques exceeding the credit balance in the current account but subject to a certain pre-approved limit granted by the financial institution.
TRADE FINANCING (MOL)
In addition to the working capital financing, financial institutions also provide financing for SMEs that are involved in domestic and international trade. Some of the common trade financing facilities provided by financial institutions are as follows:
LETTER OF CREDIT (LC) OR DOCUMENTARY CREDIT (DC)
Usage
For import or local purchases of goods, materials or equipment.
Features
A written undertaking by a financial institution to pay a seller a given amount of money subject to the following conditions:
Benefits
TRUST RECEIPTS
Usage
Extends credit facility on bills drawn under the financial institution's own LC. As such, customers do not have to make immediate payments on the LCs.
Features
A financing facility that enables a customer to accept delivery of their local/foreign purchases prior to payment of the sight bills being made by them.
Benefits
BANKER'S ACCEPTANCE (BA)
Usage
Financing of a bona fide trade i.e. export, import or domestic trade transaction.
Features
A draft (Bill of Exchange) drawn by customers to their order, payable on a specific future date and accepted by the financial institution for the purpose of financing a bona fide trade
Benefits
FOREIGN EXCHANGE CONTRACTS (FEC)
Usage
Generally for businesses, with the following features:
Features
The buying and selling of foreign exchange on a spot or forward basis, in respect of foreign proceeds or payments to be made at sight or at a future determinable date. The minimum amount of financing is RM50,000 and in multiples of RM1,000 (Bunching is allowed)
Benefits
BILLS OF EXCHANGE PURCHASED (BEP)
Usage
As a means of working capital financing for exporters.
Features
The buying and selling of foreign exchange on a spot or forward basis, in respect of foreign proceeds or payments to be made at sight or at a future determinable date. The minimum amount of financing is RM50,000 and in multiples of RM1,000 (Bunching is allowed)
Benefits
A facility provided by the financial institution for exporters, whereby the financial institution may purchase customers' outward bills for collection and the customers' account is credited immediately with the proceeds.