The Bank Payment Obligation (BPO) is a welcome additional Trade Finance instrument offered by Banks to Corporates next to the existing Letter of Credit, Guarantee and Documentary Collection products. Compared to the open account Trade in particular (even when covered by Credit Insurance), BPOs offer an optimal tool for the assurance of payment obligations, which may be financed if the supplier so wishes.

How to get started

Step 1: contact your bank relationship manager to find out if the bank already supports the Bank Payment Obligation, if they do they can assist you further.

Step 2 or alternative: visit the following website, or contact us.

Click here for a list of banks supporting BPO

Attractiveness of BPO for sellers ánd buyers

BPO transactions can be attractive for Sellers who want to:

Move away from certain open account transactions when:

Financing is required against favourable rates

Days Sales Outstanding and forecasting needs to be improved

Buyers are unwilling to pay in advance

Production risk needs to be mitigated

Move away from certain Letter of Credit transactions when:

Business is repetitive but risk mitigation (corporate) is still applicable

Producing Letter of Credit documents without (minor) discrepancies is to cumbersome

Short shipping routes are used

Move away from certain Documentary Collections when

Counterparty risk (corporate) still is applicable

Pre-export finance is required

Days Sales Outstanding and forecasting needs to be improved

Move away from certain Credit Insurance transactions when:

Payment needs to be secured by a payment instrument

Risk mitigation is required at transaction level

Days Sales Outstanding and forecasting needs to be improved

BPO transactions can be attractive for Sellers who want to:

Move away from certain open account transactions when:

Financing is required against favourable rates

Payment is required to be conditional

Buyers are unwilling to pay in advance

Shipment schedules are important

Move away from certain Letter of Credit transactions when:

Business is repetitive and offering comfort to seller is still relevant

Reduce the transaction validity period (and risk related costs)

Short shipping routes are used

Move away from certain Documentary Collections when

Payment is still required to be conditional

Financing for seller is required against favourable rates

Documents need to be received quickly