Would You Go to the Bank of Maersk?
Maersk is the world’s largest ocean carrier by capacity. Not only is the company the industry leader (in more than just size), but Maersk also has more stability than other carriers in ocean shipping because of its diversification.
When you think of Maersk’s diversification beyond international shipping, you think of oil. But now we can extend that diversification to financing.
Exporters who need financing for their international trade can now go to the Bank of Maersk instead of a traditional bank.
The shipping company actually calls their new service Maersk Trade Finance, and does not call the service nor refer to itself as the Bank of Maersk. I think I’m the only one doing that. But here’s a video from Maersk on how its giving bank-like financing to shippers so they don’t have to go to a traditional bank for it:
Maersk Trade Finance isn’t available for everyone. Maersk offers trade financing for exporters in India, Spain, Netherland, Singapore, and three U.S. states, according to its FAQ page on the service. The three U.S. states it lists are South Carolina, Texas, and Georgia.
However, you can expect the financing service to expand.
According to an American Shipper article by Eric Johnson, Maersk Line has begun offering its trade finance in six U.S. States. New York, New Jersey, and Florida are the three additional states listed in the article.
It is hard to imagine that Maersk is not working on expanding that list of states (and countries too). We do know Maersk is working on expanding to include importers as well as exporters in the financing service. “Our current products are for exporters. We will soon launch financing solutions for importers as well,” Maersk says on its FAQ page.
“Maersk Trade Finance is a secure digital platform with pre-shipment and post shipment credit facilities for the exporter of the cargo, specifically designed to improve their cash flow and working capital,” Maersk says, describing its service.
To apply for financing through Maersk, a shipper would provide financials much like he or she would at a bank. However, Maersk also takes into account a shippers’ customer history with Maersk Line. The collateral for financing is the cargo exporters are shipping.
How much financing are we talking about shippers getting from Maersk?
“We generally fund 80% of the cargo value as declared on the commercial invoice excluding any freight, insurance, other logistic charges mentioned. This is however subject to specific agreement for each individual customer,” Maersk said.
The company gives the following bullet points as advantages for financing through Maersk instead of a bank:
- Goods shipped through ML will be taken as collateral.
- Easy credit assessment and on-boarding.
- Faster funding at gate-in-stage on handover of container to Maersk.
- Eliminates redundant documentation for financing.
- Digital platform providing complete transparency.
Overall, the move of adding trade financing to their services appears to be a smart move on the part of Maersk.
Any regular reader of this blog knows that carriers have struggled to make a profit in the international shipping industry. Maersk Trade Finance should generate a nice revenue stream for the carrier through interest.
While the moves Maersk make are often followed by the other carriers of the international shipping industry, it is unlikely many would have the capital to do a similar financing service without partnering with an outside bank.
Maersk Trade Finance is transacted through Sunrise 14 A/S incorporated, which is already part of the Maersk Group.
All of this brings me back to the title of today’s blog. Many are fed up with banks and have lost faith in them since the financial crisis of 2007. Would you leave the traditional bank trade financing to get financing through the “Bank of Maersk”?