What Type of Proof of Funds Are Available?
What Type of Proof of Funds Are Available?
What Type of Proof of Funds Are Available?
Two of the most commonly used terms in trade finance are Proof of Funds and Proof of Product, otherwise known
as POF and POP. In order to engage either as a buyer or seller of commodity goods both Proof of Funds and Proof
the transaction. This financial document is most often provided by the account holder’s bank in the form of a bank
letter specific to the transaction in question. The Proof of FundsLetter assists the selling or lending party with
confidence there is cash funds available, that they are obtainable and legitimate.
Most Proof of Funds are based on a Cash Account, or the funds in a cash-backed bank account requiring account
verification. When a borrower or purchasing party lacks the credit worthiness on their own a debt-based Cash
Account can be acquired through a joint venture with an asset holder on a fee basis. In this case the Cash Account is
opened for the purpose of credit enhancement giving the borrower access to superior purchasing or lending terms
With an increased credit rating due to the credit enhancement the third-party requesting the Proof of Funds feels
more secure a borrower will be able to make timely payments; and in the case of selling or buying assets the third
party will feels more at ease they are dealing with a party who have obtained a higher credit rating and capability to
home a seller or underwriter (if a mortgage is required) will ask for evidence of down payment, usually evidenced by a
simple bank statement or escrow account statement or escrow letter. The same would apply for applications for
financing or purchases and leases of automobiles. A verification of deposit or other simple confirmation letters would
be used for bank account verification and balance confirmation in mortgage loan underwriting.
Another use of Proof of Funds in commercial financing is meeting underwriting reserve requirements. Having a
reserve fund or cash reserve can easily be satisfied through a bank, trust, or escrow issued Proof of Funds Letter.
Like trade finance, a Proof of Funds Letter with language specific to the transaction can declare to an underwriter that