If you are in the supplies business, the easiest way to access quick and sufficient capital is through LPO financing. This is usually a financing scheme issued by banks against local purchase orders that suppliers get for the supply of tendered goods and services. To find out how you stand to benefit, we took a look at the LPO Financing scheme offered by Co-operative Bank, the qualification requirements, and the terms and conditions necessary for a successful financing.
Features
The Co-operative Bank LPO Financing comes with the following features:
- Maximum Loan – 60% of input cost of servicing LPO
- Minimum loan – Kes 50,000
- Maximum Tenor – 4 months.
- Maximum Limit – Maximum exposure to a customer on LPO financing will be 70% of 3 months’ total turnovers from the issuer of the LPO.
- Availability – Facility will revolve for 12 months upon which supplier will be reviewed for renewal Pricing LPO Advance Fee 3% p.m. on the funds advanced LPO Advance Commission 1% of funds advanced Communication fee Kes. 1,500 Extension fee (Advance fee + 1%) p.m. upon application Penalty fee 5% p.m.
Pricing
The Co-operative Bank LPO Financing comes with an advance fee of 3 per cent per month on funds advanced to suppliers. The LPO financing attracts an advance commission of 1 per cent of the funds you’ll get as a supplier., and a communication fee of Sh. 1,500. Additionally, Co-operative Bank LPO Financing attracts an extension fee which includes the advance fee plus 1 per cent per month and a penalty fe of 5 per cent per month upon application of repayment extension.
REQUIREMENTS
To be successfully financed under the co-operative Bank LPO Financing, you’ll need to meet the following requirements:
- LPO Issuer must execute a Supplier Credit MOU with the Bank.
- LPO must have been issued by an Acceptable LPO Issuer as per Issuer as per the set criteria.
- Irrevocable instructions by applicant to LPO issuer to pay only to specified LPO Financing account with us
- Undertaking by buyer to remit payment of the LPO amount to supplier’s LPO Financing account with us
- Securities to be provided for amounts above Kshs. 500,000
- Applicant must have banked with the Bank for a minimum period of 6 months
- Company Profile and most recent Audited Financial Statements, KRA PIN Certificate and relevant Certificate of Registration from LPO Issuers.