Corporate Finance in UAE: An Essential Guide to Trust Receipts
As Dubai is emerging as a trading hub in the world for new business setup,so corporate finance services in Dubai are facilitating numerous methods of finances including Trust receipts. Trust receipt is a financial instrument of trade and corporate financing services in UAE to manage working capital and smooth flow of goods and services too.
How trust receipts work in UAE?
Trust receipt is a financial document that becomes necessary when a trader is in need of funding requirements from the banks. In such a circumstance the buyer imports the goods from the supplier and bank issues a Letter of Credit to the supplier for ensuring the payment upon the receipt of the required documents. After this bank settles the payment with the supplier. This is when the Trust Receipt agreement is generated and buyer takes the possession of the goods. After the selling of goods, the buyer repays the bank with in the specified period and hence the bank relinquishes its claim.
Consult with the First Check Consultants, for corporate finance in UAE regarding specific aspects of trust receipts, top banks offering trust receipts in UAE and the step-by-step guidance for the application.
Requirements for Generating Trust Receipt Corporate Finance in UAE
For generating the trust receipt in UAE, the traders must follow the specific requirements as:
Trading License
The applicant of trust receipt must have the trading license issued by Dubai Department of Economy and Tourism and along with that he must also have to open a corporate account with a UAE based bank offering trading services. Do not consider it a hassle process, for this always consult the corporate governance consultants in UAE. Their guidance will definitely help you for acquiring trust receipts in UAE.
KYC Documentation
For KYC Documentation the requirements will be,
- Passport
- Emirates ID of business owners
- Trading license
- Memorandum of Association
- Business address proof
- Banking relationship
Banks plays a vital role in the whole process of providing credit facility.After assessing the financial health of the applicant , bank agrees on the terms of issuing the trust receipts. It also involves trust receipts outlining terms, repayment period and interest rate too. For the extension of short-term financing the borrower must also have the good relationship with the bank as the maturity date of short- term finances always exist between 30 to 180 days and in case till the maturity date if no payment has been received by the bank, then bank may also dispose of the merchandise.
Import Documentation
The letter of credit always ensures that the bank guarantees for the payment to the supplier. The documentation required for the import is commercial invoice, packing list, airway bill, certificate of origin and custom clearance documents also.
Financial Guarantees
Trust receipts couldn’t be generated without the possible financial guarantees. The bank may ask for any security depending on the agreement such as fixed deposits or personal or the corporate guarantees. Sometime financed goods themselves served as a collateral and hence reduces the need of any other additional security. Trust receipts is a short-term financing and the importer have to repay the bank with in the agreed credit period as decided with in the mutual agreement.
Wrap-up
Having any query regarding the Corporate Finance in UAE, feel free to consult The First Check Consultants as we are one of the best businesses set up consultants in UAE provides corporate finance advisory services in UAE and guide the people in maintaining liquidity and support trading activities effectively.
