ECO Resources

Improving cash flow

Key takeaways

  • An exporter of clean energy products, ECO Resources faced short payment terms on supplier purchases
  • Financing these purchases and improving its working capital cycle would help strengthen ECO’s cash flow and facilitate business growth
  • Bank of America provided a US$20MM facility to support supplier payments, commercial letters of credit, trade loans, invoice financing and more

ECO Resources Trading Limited (ECO Resources) is a 100%-owned entity under the Hong Kong and China Gas Company (HKCG), the first public utility and sole provider of gas supply services in Hong Kong.

 

The core activities of ECO Resources encompasses supporting sustainable and environmentally-friendly energy businesses, specifically the production of various clean energy, renewable oil and chemical products that can help reduce carbon footprint by significantly lowering greenhouse gas emissions.

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ECO Resources’ goals

Given the fairly nascent industry and the scale of its suppliers’ operations, the payment terms between ECO and the suppliers are either at sight or generally very short, or sometimes preshipment advance payments are required to support suppliers’ manufacturing. Therefore, ECO Resources requires financing on these purchases in order to strengthen its cash flow.

 

With this in mind, Bank of America proposed a US$20MM trade facility for ECO Resources that can be leveraged for a combination of commercial LCs, as well as export and import trade invoice financing to support the client’s organic and sustainable business growth.

"It has been a challenging year for ECO Resources as we faced multiple headwinds such as COVID-19 impact and general economic weakness. The commitment by Bank of America to deliver this trade loan solution and support is laudable. The solution is simple and straightforward and therefore fast and easy to implement, supporting business growth with suppliers."

Achievements

The bespoke trade finance structure for ECO Resources not only helps improve its cash flow but also supports its sustainable business expansion together with its suppliers. For ECO Resources, Bank of America’s solution stood out in the following aspects:

 

Flexible: The facility supports a full suite of trade solutions including but not limited to commercial letter of credit, trade loans to fund letter of credit and open account basis payments, as well as financing ECO Resources’ exports to Europe. This gives ECO Resources the flexibility it needs to support its overall trade flows.

 

Simple: From ECO Resources’ perspective, the solution is simple and straightforward and therefore fast and easy to implement, supporting business growth with suppliers. The structure also includes a simplified process for ECO Resources to present alternative transportation documents available for domestic trade within free trade zones in China.

 

A significant improvement in cash flow: From either payment at sight or in mere days, the solution enabled ECO Resources to improve its working capital and strengthen its cash flow.

 

 The launch of this solution cannot be more timely as ECO Resources looks to grow its environmentally friendly energy business amidst the economic downturn prompted by the COVID-19 pandemic.