An import loan is a short-term cash advance (with recourse) that enables the customer as an importer to meet the customer‟s immediate payment obligations under a sight or issuance Letter of Credit presentation or Import Documentary Collection. Import loans in Nigeria are provided by specialist lenders.
THE PROCESS OF IMPORT LOANS
There can be a number of variation on this simple method, as it may happen that only part of the goods warehoused are released at one time or that the goods are not warehoused as they are released on a trust letter to the customer immediately they are pledged. Immediate release of the goods happens when a firm sale has been arranged and delivery can take place straightaway.
loans can be arranged for goods being imported and also for those which have been produced for export or for home sales. When a loan is arranged against imports, it is often the case that a documentary credit precedes the granting of import loans in Nigeria. By this means the bank gives instructions for money to be paid to the overseas seller of the goods or a bill of exchange to be accepted against delivery of documents of title to the goods. The bank will then have recourse against the goods and, if the arrangement with the customer are that need he need not settle with the bank immediately, an import loan can be opened and the goods held as security.
If a bill of exchange has been accepted, the customer’s account will not be debited until the bill is paid and the import loan would start from that date. The goods, however, will be in the possession of the bank before the bill is due for payment and they will then be held as security against the liability on the bill of exchange.
Care must be exercised to watch for the arrival of goods, as the bill of lading will have to be sent to the warehousekeeper with instructions to store the goods in the name of the bank.
Naturally the warehousekeeper should be reliable and, when the bank issues delivery or transfer orders, clauses should be included in them stating that delivery is to be made only on payment of the warehousekeeper’s charges. Appropriate insurance cover over the goods will at all times be necessary, and special risks such as failure of refrigeration plant for perishable goods should be properly covered. In borderline cases, it may also be considered necessary to hedge in the commodity as protection against a large charge in price.
It will be appreciated that it is important for the bank to be able to follow any goods released on trust and to have a valid claim to them. This claim is by virtue of the document of pledge. It is therefore of little use for a customer to say that he has goods which he will be selling and against which he wants an advance, and for the bank to issue him with a trust letter telling him to account to the bank for the proceeds of sale. If the goods have not been pledged to the bank prior to a trust letter being issued, the bank will have no title to the goods.
There are some exceptions in law to this, and goods on the sea or in transit from quay to warehouse might be picked up by a trust letter alone, but otherwise the bills of sales Acts would apply and the trust letter would have to be registered as a bill of sale if no prior pledge of the goods had been obtained.