Financing international trade means providing fund for various international business transactions. This is done by making use of International factoring (international buyers) or by purchase order financing (international suppliers). There is a wide range of option in international trade financing available for the borrowers. Projects for financing international trade vary greatly.
However, these programs offer facilities for availing the fund depending on the requirements. They offer enough flexibility for reducing costs of transactions and for increasing profits.
Financing international trade- advantages:
The advantages of financing international trade are as follows:
Paperworks involved is minimum as it is mostly taken care of, by the creditor.
No underwriting by importer
There is an increase in export sales. One can also avail of credit terms, which are flexible.
The turnaround time is fast and process is easy.
It is advantageous for those companies, not eligible for availing traditional financial support of foreign receivables
Financing international trade- types of loans available:
Loan term-180 days
Coverage-65 percent of the risk involved, in the event when the importer fails to make payments for import commodities. The importer is also required to furnish a promissory letter.
Loan term-10 years
Coverage-98 percent of the risk involved, in the event when importer defaults payments. The importer is also required to provide letter of credit from a foreign bank.
Size of Transactions:
The size of the transactions, involved in financing international trade can be of any size. The size of the transaction depends on the requirements of the debtor.
Cost involved in financing international trade:
Cost incurred are mainly for the application, known as the application fee; the monthly charges for the outstanding tenure of the loan.
Types of companies most benefited from international trade finance are:
Those companies, intending to increase their stake in the market, by exporting goods to international markets, but do not wish to bear the political or economic hazards of non payment are the most benefited.
USDA is a company, which has been catering to the needs of the exporters for the past twenty years. This company has provided export guarantees to may companies in the United States of America.
Last Updated on : 18th July 2013