Driving force is added to trade enterprises for financial efficiency– IB (Industrial Bank), issuing the standard warehouse receipts prepared by Shanghai Futures Exchange that an enterprise planned to deliver as a pledge guarantee , launched China’s first “credit extension secured by pledge of hedging standard warehouse receipts to be delivered” service in Shanghai.
The service is a short-term financing product where a bank makes the delivery payment for an enterprise which pledges the delivery warehouse receipts to the bank and which is simultaneously provided with futures hedging. By dint of Industrial Futures, a subsidiary of the group, IB creatively embedded the service into the hedging mechanism, with which the financing applicant is required to establish a corresponding short hedging position with a view to reducing the credit risk and market risk while greatly increasing the relevant pledge rate and loan granting efficiency.
The service meets the requirements of trade enterprises for high capital turnover efficiency. With the pledge rate of warehouse receipts up to 90%, the service generally enables the banks to grant loans within T+1 days and lift the pledge within T+3 day (T refers to the last trading date for the long position), with the repayment period given 3 days or more. No additional deposit is required to be paid to the bank in despite of the drop of spot price. With regard to conventional financing service through the pledge of warehouse receipts, its pledge rate generally ranges between 60% and 70%. Besides, the operating procedure requires 3-14 days, and the loan period is 3-6 months. Moreover, when the spot price drops below 95%, the enterprise must pay additional deposit or repay the loan to the bank.
In terms of risk control, whole process risk control can be realized in IB and Industrial Futures involving taking, locking and releasing futures hedging position as well as locking the futures deposit and futures warehouse receipts of the financing applicant, which are integral parts of the service through the pledge of standard warehouse receipts.
With lower trade cost owing to the service, on the basis of the bank loans, the enterprise is only required to pay 10% of the values of standard warehouse receipts which they plan to purchase, and is able to buy standard warehouse receipts of Shanghai Futures Exchange. For trade enterprises without stable cash flow, while facing obvious price differences in the market or having actual business needs, by means of the service, they can achieve flexible capital turnover, improve its productivity and simultaneously promote the development of real economy.