International Trade Finance has gained importance worldwide since the world has become a global village and international trade has reached a high within a short span of time. International trade takes place with the exchange of goods and services between various countries of the world.
Previously only the goods were exchanged between countries but these days with the rise in the tourism industry the exchange of services has also gained a lot of emphasis. There are various trade organizations which have taken important measures regarding international trade.
One of the biggest leap the trade world has taken is expanding their exchange programs from goods to services. The trade of services has helped to increase the GDP of various countries. The tourism industry has been the major earning industry in certain countries.
There are other small countries, islands whose major revenue depend on the tourism industry alone.
Payments Pertaining to International Trade
Financing of international trade can be stressful so the companies must be very meticulous while doing international trade. While trading with foreign countries the trader must maintain a record of the payments and must employ proper credit control measures. A legal hassle might lead to loss of time and money hence it is useful to keep track of the transaction. If financing the exports is not easy then financing for the imports is also not easy. To ensure that the trader receives his money for the overseas sales he has to evaluate the risk entailed in the whole procedure. The most important thing a trader should do is to insure his goods so that in case he has to incur a loss he receive the compensation.
Measures Taken to Safeguard the Goods
A trader should conduct a research work on the trading company with which it would trade. The company with which one would close a deal should be a company with a goodwill in the market. The trader should take care that his business does not incurs him a loss.
These are the steps taken by the trader to ensure himself of a good deal:
The credibility and the credit worthiness of the company must be evaluated and a research work must be conducted on them
The receipt of payments should be taken care of
The level of risk must be analyzed before jumping into business
The company should provide an insurance in case it fails to pay for the deal
Managing the payment from the foreign company is also an important thing to be taken care of
Finally terms and conditions regarding receiving the payment should be absolutely clear and comprehensible
While doing trade with the foreign companies a trader also should have a knowledge about the exchange rate of currencies. He should evaluate the issues regarding the exchange rates before closing a deal with the company. The risk involved in exchanging foreign currency should be kept in mind while closing a deal with a foreign company. Opening and accessing a foreign account can also lead to problem. Therefore one should be extremely meticulous about all these factors while financing international trade.
The Scotiabank and the Atlas Trade Finance Limited are the leading financial institutions which are involved in international trade financing.
Last Updated on : 18th July 2013