Business Loan

A term loan is a loan which is extended to customers with predefined repayment schedule and loan period. It might be granted to customers to be paid in a lump sum on maturity, or in monthly, quarterly, semi-annual or annual installments, or in any other convenient schedules depending on the nature of the business and the cash flow capability of the prospective borrower.

The term loan products of the Bank can be broadly classified into three major classifications based on the tenure of the loan; short term loan, medium-term loan, and long-term loan.

Short Term Loan

Features
➧ Short-term loans shall be extended to the customers to be repaid within a maximum period of one year.
➧ Short-Term loans may be repaid in a lump sum upon maturity, or in a monthly, bi-monthly, quarterly, or semi-annual depending on the nature of the business and its cash flow pattern.
➧ Short-Term Loans are granted to finance the working capital needs and/or to address other short-term financial constraints of the business
➧ The Bank may also extend the tenure of the loans if the recoverability of the loan is in question and cash flow of the business shows to do so however tenure of short-term loan shall not be extended for more than three years considering the initial disbursement date.

Medium Term Loan

Features
➧ Medium term loan shall be granted to the customer for loan period greater than one year but not exceeding a maximum period of five years.
➧ Medium term loan is intended for the financing of the acquisition of fixed assets (buildings, leased land, construction and machinery, equipment, public transport vehicles, trucks and trailers, etc.), permanent working capital need of a business, the establishment of new projects and the expansion of an existing business.
➧ medium term loan may be repaid monthly, quarterly, or semi-annually depending on the cash generating capability of the business.
➧ The Bank may allow grace period up to one year based the nature of the business or project implementation schedule.

Long Term Loan

Features

➧ long term loans are extended by the Bank to finance acquisition of fixed business assets (buildings, leased land, machinery, equipment, etc.), for covering permanent working capital need of a business, the establishment of new projects and the expansion of an existing business.
➧ long term loans are granted to be repaid for a period greater than five years but less than or equal to twenty and twenty-five years for business and consumer loans, respectively.
➧ The Bank may allow grace period up to three years for those long-term loans based the nature of the business or project implementation schedule based on project appraisal.

Overdraft facilities are extended to support working capital of businesses with voluminous transactions like: manufacturing, import, export and domestic trade, etc.

Features
➧ Overdraft facility is a form of credit facility by which a customer may be allowed to draw beyond the deposits of its current accounts for the day-to-day operational needs of a viable and ongoing business.
➧ Overdraft facility is normally approved to bridge the short-term cash deficit that arises in businesses between receipt of funds from debtors/receivables, cash sales and the disbursement of funds to creditors/payables and expenses.
➧ Overdraft facility shall be availed to customers who are engaged in businesses with a short cash flow cycle.
➧ Overdraft facility is an open credit facility that shall be availed for a maximum period of one year and reviewed every year.

Overdrawing on a Regular Overdraft Account

Features
➧ The facility will be available for customers who are enjoying overdraft facilities with Tsehay Bank and exhibiting good swing (at least meet the minimum requirement stipulated in the relevant NBE directives) and turnover (at least meet the minimum acceptable range indicated in the customer risk rating parameter);
➧ The facility allows customers facing unexpected shortage of working funds to draw a specified sum of money over and above their overdraft facility limit;
➧ Overdrawing shall be provided for highly valued customer of the Bank with proven credit relationship;
➧ Notwithstanding the above, the maximum amount to be financed to a customer shall not exceed 15 million or 30 percent of the overdraft facility whichever is lower. In addition, the facility shall be settled within a maximum period of three months or one month prior to the expiry of the overdraft facility, whichever comes first.

Merchandise loan is availed to customers, who relatively keep high volume stock because of their production or distribution strategy.

Features
➧ Merchandise loan is availed against the pledge of the proposed merchandise.
➧ Merchandise loan is to relieve the customer from cash flow problems arising from money being tied up in merchandise.

One-Time Merchandise Loan

Features
➧ A one-time merchandise loan is a credit facility whereby the loan contract remains in force only until the maturity period of the loan;
➧ The maximum maturity period of a one-time merchandise loan shall be four months. However, the period can be extended for additional two months upon existence of genuine acceptable reason;
➧ The Customer Relationship Manager shall make the necessary follow-up to make sure that such merchandise loan balance is reduced progressively over the loan period or fully Settled by the due date.

Revolving Merchandise Loan Facilities

Features
➧ The Bank may approve a revolving merchandise loan facility to its customers by allowing customers to utilize loan up to a certain approved limit.
➧ Merchandise Loan Facility shall be reviewed every year unless the Bank demands it to be reviewed by the loan approving committee for any remedial action when the performance of the account is deteriorating.
➧ The tenure of each advance shall be four months.
➧ To determine merchandise loan facility utilization, the sum of advances shall be added up. It should be noted that the Revolving Merchandise facility limit is only approved for clients with sound financial performance and commendable repayment record.
➧ Renewal of revolving merchandise loan facility is subject to proper utilization of the facility.

Merchandise Against Goods in Transit/Import Document

This facility is availed against import LC document or goods in transit supported by complete set of import documents to bridge working capital shortage until the goods in transit are realized into cash.

Features
➧ The applicant should be well established prominent credit customer of the Bank with healthy track records.
➧ Complete set of import documents such as bills of lading, truck/ air way bills, commercial invoices, certificate of origin, insurance certificate, packing list and other related documents should be submitted.
➧ The merchandise items should easily marketable, non-perishable and that have low sensitivity to changes in price, fashion or test of consumers.

Warehouse Receipt Financing

This credit product is provided in collaboration with warehouse operators like Ethiopian Commodities Exchange (ECX).

Features
➧ Only commodities that are agreed to be traded by ECX shall be accepted;
➧ The facility may be granted against warehouse receipts issued by warehouse service providers authorized by law and endorsed by Tsehay Bank S.C.
➧ The maximum advance shall not exceed 75% of the value of the merchandise.
➧ The prices at ECX shall be used to determine the value of the merchandise.
➧ Interest rates shall be applied as per the terms and tariffs of the Bank.

Pre-Shipment Export Loans

➧ Pre-shipment export credit is granted to allow to procure, process, packaging and transporting the goods and pack them for export. The advance shall be liquidated when the relevant export proceeds are collected.
➧ Pre-shipment export loans shall be advanced against bona fide export sales contracts, or DBE guarantee or export letter of credit or against acceptable collateral.
➧ As the advance is very much risky, it should be availed for highly reputed customers with strong financial position and sound export performance.

Revolving Pre-Shipment Credit Facility

Features

➧ Revolving pre-shipment facility is approved to exporters by assigning a limit for a year.

➧ The loan contract for revolving pre-shipment facility should not be made for each advance; rather the contract shall be concluded once for the total facility limit.

➧ Revolving pre-shipment facility shall be renewable every year and the tenure of each advance shall be six months.

➧ When a limit is approved, the sum of all outstanding advances on import bills shall not exceeded the approved limit.

➧ A one-time Import Letter of Credit Facility is a non- renewable letter of credit facility extended to applicants, such as investors, importers, and others that have no Import letter of Credit facility or who want to import over and above the existing Important Letter of Credit    Facility limit.

➧ An import Letter of Credit Facility may be available to an importer whose funds are temporarily tied up in stock or other current assets that are easily convertible to cash, in the event that he/she it experiences a temporary shortage of working capital.

➧ Any import applying for Import Letter of Credit facility should come up with import trade license. But in case of non-importers who apply for one-time Letter of Credit, an investment certificate and pro forma invoice can be accepted.

Import Letter of Credit Settlement Loan

Features

➧ Import Letter of Credit Settlement Loan is a form of loan extended to a borrower by converting the outstanding import letter of credit document’s value either to a merchandise loan facility or a term loan for a maximum period of one year when a customer is unable to clear the L/C document due to shortage of working capital.

➧ It is granted to existing high value customers of the Bank having temporary cash flow problem to settle the net-margin-held on the import L/C document value.

Letter of Grantee

The bank grants the loan with or without collateral depending on the nature of the goods imported and the credit risk grade of the customer.

A Letter of Guarantee issued by a bank is a written promise by the Bank to pay a sum of money to the beneficiary (local or foreign) in the event that the obligor fails to honor his/her/its obligations in accordance with the terms and conditions of the guarantee, agreement/contract.