Example: 30 Minutes spent, 9 offers received
The following practical example shows the process of finding and choosing bank offers on the X-Tron marketplace. The name of the exporter was anonymized for data protection reasons.
Buyer credit in Turkey
A leading manufacturer of nonwovens wants to expand its production in Turkey and needs high-quality machines from Western Europe. Since there are only very few companies that can provide these, the Turkish company also spoke to Anlagentechnik AG, which is based in Germany. The Turkish company needs financing in the amount of 38 million euros with the longest possible credit period. Thus, Turkish banks are out of the question. That is why the importer and exporter have agreed that Anlagentechnik AG will take care of finding a low-cost buyer credit.
The search begins
Anlagentechnik AG works closely and trustingly with its 7 house banks. Due to the economic and political situation in Turkey, Anlagentechnik AG assumes that only up to 3 of its 7 house banks will submit an offer for Turkey. As the Anlagentechnik AG is in competition with two other plant manufacturers, the Anlagentechnik AG must also ensure that the customer receives an attractive financing offer. It therefore decides to involve X-Tron, because the exporter can quickly search for a buyer credit on its marketplace and find corresponding offers.
Broad choice of banks
Anlagentechnik AG logs into X-Tron and fills out the request form for a buyer credit. . It is generally in favour of competition between banks and would therefore like to address a few other banks. However, in order to keep information about its request from being carried too far into the market, it wants to limit the number of “new” banks. It decides to use the bank exclusion feature to exclude around three dozen international commercial banks from receiving their financing request, refining the selection of banks to 6 with just a few clicks. As Anlagentechnik AG wants to give all of its house banks a chance to make an offer, it directly enters the details of their personal bank contacts using the recommendation feature. Thus, Anlagentechnik AG ensures that only these bank employees receive the request. In addition, Anlagentechnik AG involves 2 other banks through this feature, a French and a Dutch bank. His Turkish client had recommended these to him. In total, 15 banks receive the request (its 7 house banks, 2 banks recommended by the Turkish client and the 6 banks on X-Tron that Anlagentechnik AG left included during the selection process).
Anlagentechnik AG now gives all banks a period of 10 days for submitting a non-binding financing request. All 15 selected banks immediately receive an email notification from the X-Tron system that there is a new request for a buyer credit to Turkey on X-Tron. At the end of the 10-day tendering period set by the exporter, this time Anlagentechnik AG receives an automatic notification from the system that several banks have made an offer via X-Tron responding to their request. The Anlagentechnik AG can now have a look at the overview of bank offers, which shows the most important aspects of each offer and allows the company to compare them systematically. If need be, it can also download the most interesting offers as a PDF with all the details. The Anlagentechnik AG then selects up to two bank offers. These two banks will immediately receive an automatic notification. At the same time, all the other banks that took part in the tender receive a message from the system that their offer was not accepted this time.
And the winner is…
The result of the search query is as follows: A total of 15 banks received the request, 9 of which produced useful offers for this difficult market. The range for the interest margins was between 75 bps and 110 bps. In this case, Anlagentechnik AG did not opt for the cheapest offer, but for the offer from one of its house banks (interest margin 80bps) and another bank (interest margin 77bps). The reason for not choosing the cheapest offer was to satisfy both the importer and its house banks. Despite being 5bps more expensive, the chosen offer was enough to win the order from the Turkish importer, whilst also satisfying its consortium of house banks.
Benefits for all involved parties
The offer was found within the tendering period of 10 days set by it, with very little expenditure of time (all-in-all 30 minutes). At the same time, the Anlagentechnik AG got a better feeling for the financing market. In addition, the entire process from the inquiry to the offer was very transparent and also significantly more secure than traditional communication via unencrypted e-mails and telephone calls.
He receives long-term financing over 10 years in euros with a Western European bank. None of the Turkish banks could have provided such an offer. With the X-Tron overview of conditions, Anlagentechnik AG can easily prove to the Turkish customer that he has received low-cost financing. He does not bear any costs for the search query from Anlagentechnik AG.
Many banks have probably not yet heard from the Turkish buyer. They have thus received an interesting business opportunity without any additional effort.
Costs for the Anlagentechnik AG
The request for a buyer credit costs the exporter only 249 euros.
Costs for the Turkish importer
The importer does not pay anything for the exporter’s search query.
Costs for the banks
Since this is a non-binding offer, the two banks that made it onto the shortlist only have to pay a fee of EUR 900. This is very little when one considers the usual acquisition costs of banks abroad, including branches and representative offices abroad.
Costs for binding vs. non-binding offers
If Anlagentechnik AG had requested a binding offer instead of a non-binding one, the bank with which the financing is ultimately concluded would have had to pay a fee of EUR 3,500. The bank’s one-time all-in fee depends on the OECD category of the ordering country (Turkey currently at 5) and the loan amount. Since the bank receives a management fee of at least 20 bps when the loan agreement is concluded (at least EUR 76,000), a fee for X-Tron of around 4.5% of this amount (or just under 1 bps of the loan volume) is appropriate. If the exporter accepted a binding offer, the second selected bank (which is not a house bank) would have had to pay 5,000 euros.