Case-Studies

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Case Scenario- Dated 21-March-2024

 

 

Problem: Mr. Ali Alrayes is the sole owner of Blue Waves Commercial Broker Company. He came to us through a recommendation from one of our clients, seeking advice on how to get financial support. After we checked his background (KYC), we found out that Mr. Ali’s business model was to sign contracts with buyers and sellers to supply sugar, ranging from 100 to 180 tons over a year, in four installments. He used to import the sugar from sellers in Brazil directly to buyers’ ports in Turkey, Nigeria, and Algeria through bank transfers from his clients’ accounts to the sellers’ accounts in Brazil. Upon receiving the funds, the seller would send the policy documents/bill of lading to Mr. Ali. He would then invoice the buyers, adding his profit margin.

 

      1. Due to limited cash flow, Mr. Ali acted as a broker, finding buyers and sellers and adding a small commission per the contracts he signed.
      2. Some buyers began approaching sellers directly after seeing the seller’s label on the product, seeking better prices.
      3. Blue Waves Commercial Broker’s annual turnover was low because Mr. Ali only received a profit margin.

    What we did after agreeing with Mr. Ali;

     

        1. We planned to bring Blue Waves Commercial Brokers back on track and changed its business license from a broker to a trading company.
        2. We changed the payment method from bank transfers to letters of credit (LC).
        3. We asked the buyers to open LCs for Blue Waves Foodstuff Trading, per the signed contracts.
        4. We used our banking network to arrange for the bank to open a new LC for the seller, guaranteeing the buyers’ LC (LC Discount).

      Impact we made:

          1. We solved the cash flow issue by using the buyers’ LC to open a new LC for the seller.
          2. All transactions were made through Blue Waves Foodstuff’s bank account, leading to a significant increase in annual turnover from less than $200,000 to $1.7 million.
          3. Company profits grew alongside turnover.
          4. Products now carry the Blue Waves Foodstuff label instead of the Brazilian seller’s label.
          5. Despite an official capital of only $100,000, Blue Waves can handle trades worth $5 million by discounting its clients’ LC documents. 
         
         

        The lesson learned is that; selecting the appropriate company setup and the right bank for the specific business model could have saved time, money, and had a positive impact on the company’s annual sales. Consulting before setting up the company would have helped avoid changes in the license, business focus, and bank account later on.

         

        Special thanks to Mr. Ali Alrayes for allowing us to share this in public .