Trade Finance Solutions For Importers
Import financing includes a range of trade finance methods we provide to finance import transactions. From import letters of credit and import bank guarantees, to invoice factoring and financial instrument monetization, we provide import financing that makes cross-border trade easier, more profitable and less risky.
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. Import financing makes far more sense than paying cash in advance for goods, even if you have ample cash on hand, because import financing provides additional benefits well beyond payment methods.
Import financing solves many of the problems you face when sending money internationally. When you involve us as a third-party financier we can provide guarantees to both importers and exporters that ensure honest and transparent transactions.
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, while also mitigating risk.
We bring global experience, unparalleled underwriting expertise and an impressive group of strategic partners to every deal, along with an expert deal team who work seamlessly to provide you the import financing your business needs.
Letters of Credit
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.
Trade Finance Learning Center
With more than 80% of the world’s trade depending on trade finance it is an essential segment of the financial services sector. It is also one of the least understood of the financial services. One of the things that undermine people’s understanding of trade finance is the absence of a single vocabulary. Do a search for the definition of import financing, for instance, and the top 20 results will provide 20 different definitions. We are creating a learning center with content that will help improve understanding of trade finance and its various component segments. Each of the below tabs provides the factual information you need to make good business decisions, beginning with important trade finance definitions.
Accounts Receivable is money owed to a company by a customer for products and /or services sold. Accounts receivable is considered a current asset on a balance sheet once an invoice has been sent to the customer.
Accounts Receivable Factoring
Accounts Receivable Factoring is a method of Trade Financing where a company sells their accounts receivable in exchange for working capital. The purchaser of the receivables relies on the creditworthiness of the customers who owe the invoices, not the subject company.
Advance Against Documents
Advances Against Documents are loans made solely based on the security of the documents covering the shipment.
Asset Based Lending
Asset Based Lending is a method of Trade Financing that allows a business to leverage company assets as collateral for a loan. Asset-based loans are an alternative to more traditional lending which is generally characterized as a higher risk which requires higher interest rates.
Cash Against Documents
Cash Against Documents is the payment for goods in which a commission house or other intermediary transfers title documents to the buyer upon payment in cash.
Cash in Advance
Payment for goods in which the price is paid in full before shipment is made. This method is usually used only for small purchases or when the goods are built to order.
Cash with Order
Cash with Order is the payment for goods whereby the buyer pays when ordering and in which the transaction is binding on both parties.
Commercial Finance is defined as the offering of loans to businesses by a bank or other lender. Commercial loans are either secured by business assets, accounts receivable, etc., or unsecured, in which case the lender relies on the borrower’s cash flow to repay the loan.
Confirmed Letter of Credit
A Confirmed Letter of Credit is a Letter of Credit issued by a foreign bank, which has been confirmed as valid by a domestic bank. An exporter whose form of payment is a Confirmed Letter of Credit is assured of payment by the domestic bank who confirmed the Letter of Credit even if the foreign buyer or the foreign bank defaults.
Consignment is a delivery of merchandise from an exporter (the consignor) to an agent (the consignee) subject to an agreement by the agent that the agent will sell the merchandise for the benefit of the exporter, subject to certain limitations, like a minimum price. The exporter (consignor) retains ownership of and title to the goods until the agent (consignee) has sold them. Upon the sale of the goods, the agent typically retains a commission and remits the remaining net proceeds to the exporter.
A Cross-Border Sale refers to any sale that is made between a firm in one country and a firm located in a different country.
Factoring is the selling of a company’s invoices and accounts receivable at a discount. The lender assumes the credit risk of the debtor and receives the cash when the debtor settles the account.
Invoice Discounting is a type of loan that is drawn against a company’s outstanding invoices but does not require that the company give up administrative control of those invoices.
Invoice Factoring is one of the most common methods of trade financing. Your company sells their invoices to a factor in exchange for immediate liquidity. The factor who purchases the invoices relies on the creditworthiness of the customers who owe the invoices, not the subject company.
Irrevocable Letter of Credit
Irrevocable Letter of Credit is a Letter of Credit in which the specified payment is guaranteed by the bank if all terms and conditions are met by the drawee.
Letter of Credit
Letter of Credit or LC is the most common trade finance solution in the world. A Letter of Credit is a document issued by a bank for the benefit of a seller or exporter, which authorizes the seller to draw a specified amount of money, under specified terms, usually the receipt by the issuing bank of certain documents within a given time.
Open Account is a trade arrangement in which goods are shipped to a foreign buyer without guarantee of payment. The obvious risk this method poses to the supplier makes it essential that the buyer’s integrity be unquestionable.
Pro forma Invoice
Pro forma Invoice is an invoice provided by a supplier prior to the shipment of merchandise, which informs the buyer of the kinds, nature and quantities of goods to be shipped along with their value, and other important specifications such as weight and size.
Receivable Management involves processing activities related to managing a company’s accounts receivable including collections, credit policies and minimizing any risk that threatens a firm from collecting receivables.
Revocable Letter of Credit
Revocable Letter of Credit is a Letter of Credit that can be canceled or altered by a buyer after it has been issued by the buyer’s bank.
Structured Trade Finance
Structured Trade Finance is cross-border trade finance in emerging markets where the intention is that the loan gets repaid by the liquidation of a flow of commodities.
Trade Credit Insurance
Trade Credit Insurance is a risk management product offered to business entities wishing to protect their balance sheet assets from loss due to credit risks such as protracted default, insolvency, and bankruptcy. Trade Credit Insurance often includes a component of political risk insurance, which ensures the risk of non-payment by foreign buyers due to currency issues, political unrest, expropriation, etc.
Global Reserve Currency May No Longer Be US DollarThe issue of when a global reserve currency begins or ends is not an exact science. There are no press releases
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