Bankers and exporters

Although Elite Racers plc is a public company, it only has a few hundred shareholders, and its shares are not quoted on the Stock Exchange. This makes is very dependent on the financial support of its bankers. Elite Racers have concentrated production on a small range of high quality racing cycles. Until recently the bulk of their sales were in the UK, Germany and Scandinavia, but last year they sponsored a group of riders in the Tour de France and one of them came first in one of the mountain climbs. The favourable publicity has produced customers from all over the world and Christopher Chesterton, the Financial Director, is running into a new set of problems. It is proving difficult now to collect payments from some of the newer and more distant customers, and sometimes they are paid in foreign currencies which have gone down in value since the contract was agreed. He has asked for help from the company's own bankers and a factoring company which has been recommended to him. He has received the following letters in reply.

Factoring International Tavistock House, Leadenhall Street, London EC3 INN Telephone 081 325 3253

Date: Mr Christopher Chesterton Elite Racers PLC Overton Works Cranmoor Road Wheatley Sheffield S27 5YQ Dear Mr Chesterton, Our reference EKQ JHW I am writing in response to your letter of the [date] enquiring about the facilities we offer to companies like yours in the export business. We are one of the largest factoring companies in the world and can certainly offer you the benefit of our long and wide experience. Through our factoring service we can eliminate the risk that you will not be paid for the goods you sell overseas. To achieve this outcome we take over complete management of your export sales ledgers. It would not be logical for us to accept only the most difficult collections. Indeed it is because we take over the whole portfolio of our clients' overseas debts that we are able to quote such competitive rates for commission. One of the benefits of us taking over like this is that your staff are relieved from the routine duties of sending out reminders to slow-payers, and dealing with bad debts generally. Another is that we are normally prepared to advance up to 80% of the invoiced amount which means you are paid earlier than you would normally expect. Another service we offer is forfeiting. This enables you to provide your buyers with up to 100% finance on credit terms and tailor repayment programmes without risk to you. It is simple, finance can be arranged quickly, and the documentation is minimal. I need to meet you to explain the full range of our services and hope to be in the Sheffield area on Wednesday and Thursday of next week. Could we arrange a meeting during that time? I would be available from midday on Wednesday to six o'clock on Thursday. I look forward to hearing from you. Yours sincerely, Alistair Thornton Executive Assistant

Barchester Bank plc Foreign Department Stanton House, Central Parade, Sheffield si 3by Tel 0742 396541 (ext 13) Fax 0742 667345

Date: Mr Christopher Chesterton

Elite Racers PLC, Overton Works

Cranmoor Road

Wheatley

Sheffield S27 5YQ

Dear Mr Chesterton,

In reply to your letter of [date]. I am pleased to give some basic information on how the bank can help you to eliminate the risk of losses arising from adverse fluctuations in the currency exchange rates. The best advice might be to ensure that all your contracts call for payment in sterling, but this only passes over the exposure to your customer who might be entitled to expect some compensation in the form of a lower quotation. What the bank offers you is a forward deal by means of which the bank agrees to exchange the foreign currency for you, at a rate determined now. According to market expectations agreed will be either above or below the «spot» (or current rate of exchange). One of the big advantages you would find from the use of these forward deals is that you would be able to calculate costs and quote prices with confidence. We can offer you forward exchange contracts in 35 different currencies and quote you forward rates for delivery up to three years ahead, or even longer in some cases.We have a whole range of other services we can offer and I would certainly like to explain them to you in such detail as you require. Would you like to come to my office? Or would it be easier if I came to the Overton Works?

I look forward to hearing from you.

Yours sincerely,

Julia Squires

Assistant Manager

Your task

After studying the letters you are to define merits and demerits of factoring and forward deals.

Explain, in about 200 words, ways in which banks might help exporters to overcome some of their problems.

Factoring
Merits:	1)
	2)
Demerits:	1)
	2)
Forward deals
Merits:	1)
	2)
Demerits:	1)
	2)

Section R. Text for home translation

Your task: Give full written translation of the text with analysis of translation techniques. Pay special attention to the highlighted words and phrases. While translating, complete your glossary on the topic.

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