Trade Finance Solutions For Importers
Import Financing is a catch all term that describes a range of financing methods used to finance imports and we offer a range of import financing methods. From import letters of credit and bank guarantees to accounts receivable financing and invoice factoring, to financial instrument monetization, we provide the financing that importers need. We’ll mitigate your risk and make cross-border trade deals easier than ever before.
Import Financing Solutions We Provide
- Import Financing
- Financial Instrument Monetization
- Accounts Receivable Financing
- Letters of Credit
- Bank Guarantees
- Invoice Factoring
- Trade Financing
- Asset Based Lending
- Standby Letters of Credit
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Import Financing Solutions
Import Financing is a specialized Trade Finance Solution used to finance the purchase of goods which are being exported from one country for the purpose of being imported into another country. For importers, using Import Financing makes far more sense than paying cash in advance for the goods, even if the importer has ample cash on hand because import financing provides tremendous benefits for importers that extend far beyond payment methods.
Import financing solves many of the problems faced whenever sending money internationally by involving third-party financiers who provide guarantees to both importers and exporters that ensure honest and transparent transactions. Import Financing when combined with related trade credit bridges the diverging needs of importers and exporters so that goods and money keep flowing to everyone’s benefit.
To meet the growing demand for trade finance and minimize the impact of the global shortage of trade finance Global Trade Funding offers a range of import financing solutions that will enhance your ability to trade globally, improve your cash flow and make your business more profitable. We bring global experience, unparalleled underwriting expertise and impressive strategic partners to every deal while our team of experts works seamlessly to provide you the import financing your business needs.
Letters of Credit are a common import financing method. They are versatile, secure and can be used to finance any import transaction making them very effective payment instruments.
Bank Guarantees are instruments issued by banks that guarantee payment of the importer’s obligations to the exporter if the importer fails to make full payment under the contract.
Bank Instrument Monetization converts or monetizes idle financial instruments into cash by liquidating them to provide capital for import financing with little cost and almost no risk.
Invoice factoring is a common import financing method where the importer sells invoices or accounts receivable to a factoring company to raise cash that can be used to fund import transactions.
Import Financing Methods
Letters of credit are the most widely used form of Import Financing worldwide. Letters of Credit are financial instruments issued by an importer’s bank that authorize the exporter to withdraw funds from the bank under certain conditions. Letters of credit are issued in favor of a named beneficiary (the exporter), for a stated amount, and with a hard expiration date. Letters of credit specify the terms and conditions under which payment will be made. In order to draw payment from the importer’s bank, the exporter has to provide documentary evidence that the goods have been shipped in accordance with the terms and conditions specified in the letter of credit. The documents required typically include an invoice or receipt for the goods and a bill of lading confirming that the goods have been shipped; insurance documents, inspection reports, and other export documents may be needed as well.
When an exporter presents correct documentation along with a demand to draw to the importer’s bank, the bank is obliged to pay, whether or not the importer has provided the funds to do so. Depending on the terms specified in the letter of credit, payment can be in the form of either a funds transfer known as a sight draft or a promise to pay which is known as a term draft. A promise to pay often takes the form of a bill of exchange, which is a non-interest bearing note requiring the issuer to make payment at a specified time in the future. Bills of exchange can themselves be used as a means of payment since they can be endorsed over to another beneficiary. They can, therefore, help to ease cash flow pressures for exporters.
Sometimes, a trusted third party – usually a major international bank – acts as guarantor for a letter of credit to protect the exporter in the event the issuing bank defaults on payment. These are known as confirmed letters of credit. Letters of credit eliminate the obligation of the importer to pay for goods prior to shipping, since the importer’s bank in effect guarantees that payment will be made when documentary evidence that the goods have been shipped is received by the bank. Letters of credit eliminate much of the risk inherent in international trade but can be expensive, and if too tightly specified they can be difficult to enforce, which is likely to result in expensive legal battles.
A less expensive but slightly riskier form of trade finance for imports are Documentary Collections. In documentary collections, the sale of goods is settled by banks through the exchange of documents. The exporter provides documentary evidence to his bank that the goods have been shipped, usually in the form of a bill of lading. The exporter’s bank forwards the bill of lading to the importer’s bank and, in return, receives payment in settlement of the invoice. Settlement can be a funds transfer or a promise to pay, such as a bill of exchange. In documentary collection transactions the importer’s bank does not guarantee payment. If the importer does not accept the goods, the bank won’t pay. In documentary collections, title to the goods does not pass to the importer until payment has been made, so the exporter can recover the goods. However, recovering goods from locations in foreign countries can be difficult and expensive.
Import Financing Learning Center
Trade finance is an important, highly necessary business in the financial services sector. Between 80% and 90% of all global trade relies on trade finance solutions. It is also one of the least understood areas in the financial services sector. One of the things that undermine people’s understanding of trade finance is the absence of a universal vocabulary. Do a search for the definition of import financing, for instance, and the top 50 websites in search results will likely provide 50 different definitions.
We are creating a learning center with content that will improve understanding of trade finance and import financing. We are beginning with vocabulary and will include the definition of relevant industry terms on each page so our clients and visitors will have the factual information they need to make good business decisions.
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