Loan Collateral Scheme
Innoauto Transport Association (ITA) is funding an innovative scheme to reduce risk for banks and financial institutions to enable them to provide more loans on affordable public transport vehicles.
1. The Borrower pays a 1/3 Deposit to the Bank to have skin in the deal.
2. The Bank pays ITA TT 1/3 as a Deposit contribution.
3. ITA places the vehicle on the ship and provides the Bank the BL in the name of the Bank, now the Bank has full ownership rights and control of the vehicle.
4. Contemporaneously, the Bank provides an LC for 1/3 payable on sight at Port of Delivery.
5. Upon arrival at the Port, ITA draws on LC, pays duty and clearance, details the vehicle and delivers it to the Bank for delivery to the Borrower.
6. Upon delivery of the vehicle, the Bank pays the balance 1/3 into a ITA fixed deposit account with the Bank, to be held as additional security with gradual repayments over the 12 or 24 month loan period.
The bank can now lend 2/3 on a vehicle valued at 3/3 yet the risk is limited to just 1/3 in addition to securing a 1/3 capital deposit. The scheme effectively allows the Bank to double it’s lending capacity and profit.