OREANDA-NEWS. On August 03, 2007 Bank of Georgia has become the first bank to conclude a factoring transaction in Georgia. Under the EBRD’s Trade Facilitation Programme (TFP) the bank signed a factoring agreement with Magoili Ltd worth $200,000, covering the supply of raw materials for road construction, reported the press-centre of EBRD.

This will allow Magoili to immediately get funds for its deliveries instead of waiting for payments from its clients.

Through factoring, Bank of Georgia provides its corporate clients an additional way to obtain funding without having to mortgage property. Factoring, which is the activity of purchase, administration and collection of short-term accounts receivable by a bank, is a fast and flexible method of improving a company’s cash flow and providing working capital for the company.

With factoring, companies get immediate access to cash that is normally tied up for 30, 60 or 90 days in accounts receivable invoices. With the use of factoring services, a business can take advantage of growth opportunities, reduce debt and solve problems associated with the collection of the accounts receivable.

The EBRD has included factoring as a new product into TFP in order to further transfer know-how and innovative trade finance solutions to its countries of operations. Through TFP the EBRD provides also guarantees to international confirming banks and factoring companies, taking the political and commercial payment risk of international trade transactions undertaken by banks in the countries of operations (the issuing banks). In addition, the EBRD grants short-term loan facilities to banks and factoring companies for the purpose of funding sub-loans to their clients.

Established in 1999, the programme has grown rapidly. As of July 2007, TFP has facilitated more than 6,250 trade deals worth nearly ?3,6 billion, including 436 transactions in Georgia worth ?200 million.

To support this new activity, Bank of Georgia benefited from consultancy services financed by the EU and provided by Ben Hosh, a partner of Triangle Trade Finance with long-standing experience in the trade finance industry. In five missions to Georgia over the past year he helped to establish factoring services at three local banks.

“It is exciting to see Bank of Georgia introduce factoring and to take its place in the rapidly expanding global factoring community which reached a total world volume of ?1.1 trillion in 2006. I am confident that this is the first of many such transactions that will take place to support the growing SME sector in Georgia”, Mr Hosh said about the agreement between Bank of Georgia and Magoili. “This is another milestone in the long-standing cooperation between Bank of Georgia and the EBRD”, added Rudolf Putz, Head of TFP at the EBRD.

“This contract is the first case of delivering factoring service in Georgia. We are delighted that Bank of Georgia has started to offer its clients this service as will allow companies to get funding for working capital”, said Ramaz Kukuladze, Deputy Chief Executive Officer of Bank of Georgia.

Bank of Georgia was the first Georgian Bank to become an issuing bank under TFP in 1999 and has since used TFP facilities for financing almost 300 foreign trade transactions worth ?135 million.