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  • Coffee Financing Example

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    This blank contract outlines the terms of a prefinancing loan from Root Capital Inc. to a borrower cooperative. The 3-sentence summary is: The contract specifies that Root Capital will provide a loan of up to $X to prefinance up to 60% of the value of coffee purchase contracts the cooperative has signed with buyer Y, with the loan intended to finance growing, harvesting, and processing costs, and additional contracts could be approved as collateral if they are with US or European importers. Risks like exchange rates and transfer costs are borne by the borrower, and new repayment instructions must be signed for any new contracts added to the loan agreement.

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    This blank contract outlines the terms of a prefinancing loan from Root Capital Inc. to a borrower cooperative. The 3-sentence summary is: The contract specifies that Root Capital will provide a loan of up to $X to prefinance up to 60% of the value of coffee purchase contracts the cooperative has signed with buyer Y, with the loan intended to finance growing, harvesting, and processing costs, and additional contracts could be approved as collateral if they are with US or European importers. Risks like exchange rates and transfer costs are borne by the borrower, and new repayment instructions must be signed for any new contracts added to the loan agreement.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    197 views1 page

    Coffee Financing Example

    Uploaded by

    coffeepath
    This blank contract outlines the terms of a prefinancing loan from Root Capital Inc. to a borrower cooperative. The 3-sentence summary is: The contract specifies that Root Capital will provide a loan of up to $X to prefinance up to 60% of the value of coffee purchase contracts the cooperative has signed with buyer Y, with the loan intended to finance growing, harvesting, and processing costs, and additional contracts could be approved as collateral if they are with US or European importers. Risks like exchange rates and transfer costs are borne by the borrower, and new repayment instructions must be signed for any new contracts added to the loan agreement.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
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    of 1

    PREFINANCING CONTRACT

    This is a blank contract. For legal reasons, completed contracts are not available for posting. Each
    Cooperative’s page on FairTradeProof.com notes if a grower has a prefinance contract.

    [Name of Borrower]
    Address
    LENDER:
    [Date] This is the lender that is
    providing the loan based
    Dear Mr/Mrs. [name], on the Cooperative Coffees
    purchase contract. We
    With reference to your credit application dated [month], [year], we are pleased to inform you that it
    was decided that we are prepared to provide a loan to [Name of group]., subject to the following partnered
    terms with Root Capital
    and conditions: in 2002 to provide most of our
    contract prefinancing.
    1. Loan agreement: The loan agreement (hereinafter called “Loan Agreement”) is
    between Root Capital Inc. (formerly EcoLogic Finance Inc.) of the
    United States of America (hereinafter called the “Lender”)“Borrower”
    and is the farmer
    [Name of group] (hereinafter called: the “Borrower”). Cooperative.

    2. Loan amount: A maximum of USD $X (X U.S. DOLLARS 00/100).

    3. Risks: Exchange rate risks, transfer risks and other costs associated with
    closing this loan shall be borne by the Borrower.

    4. Purpose of the loan: Pre-finance the purchase of coffee for export. This is the only purpose
    Specifies that the loan is intended
    for which the loan may be applied. to finance the costs of growing,
    harvesting, and processing the
    RISKS: 5. Contracts: The loan will be used to pre-finance the following coffee coffee
    purchasebeans that Cooperative
    contracts (hereinafter called “Contracts”) with buyer(s) buyer Y
    Throughout the world, coffee Coffees has contracted to
    (hereinafter called: “Buyer(s)”):
    industry trade is conducted purchase.
    in US Dollar contracts Number
    and Dated Shipment Notes
    payments - providing a standard
    XXX Mm/dd/yyy Mm/dd/yyy 250 bags of 69 kilos @ $X/lb. FT Org
    XXX Mm/dd/yyy Mm/dd/yyy 250 bags of 69 kilos @ $X/lb. FT Org
    and reducing currency risk.
    Electronic transfer of funds
    through the SWIFT system – The Lender will pre-finance a maximum of 60% of the total value of
    rather than faxes and telephone the Contracts.
    instructions – has eliminated This establishes a mechanism
    The Borrower can only submit additional contracts with this for
    Buyer(s)
    the Cooperative to apply
    virtually all risk associated with or with other U.S. or European-based buyers that will serve as a basis
    wire transfers. International for this Loan Agreement. Upon the Lender’s approval of thesefor additional loans as they sign
    wire transfer fees are typically contracts, the Lender will inform both the Borrower and the export
    Buyer(s)contracts with other
    $30 per transfer. importers.
    which of the existing Contracts can be replaced by newly submitted
    contracts.

    For every newly submitted contract, new Repayment Instructions


    between the Lender, the Borrower and the Buyer must be signed.

    675 Massachusetts Avenue, 8th Floor • Cambridge, Massachusetts 02139-3309 • t 617 661 5792 f 617 661 5796 • www.rootcapital.org

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