Continuing with our educational series on Trade Finance, in this article we look at who Trade Finance Providers are and what their role is in International Trade transactions..
The lengthy trade cycles and financial risks inherent in conducting international trade transactions mean that firms engaged in import and export continue to rely on trade finance as a key tool when managing their accounts and cashflow.
Historically, this been provided to MNCs by traditional commercial banks, with SMEs left to rely on conventional banking products or sporadic government finance initiatives.
However, with trade finance under supplied following the financial crisis, the number of non-bank lending platforms offering these products to both SMEs and larger clients has grown steadily in recent years.
Continuing with our educational series on Trade Finance, in this article we look at Import and Export Finance and how it works in international trade.
Moving raw materials, incomplete goods and finished products between trade jurisdictions can be fraught with regulatory complexity, financial risk and business uncertainty.
As a result, many firms refrain from engaging in importing or exporting. However, these activities can also be extremely lucrative; importing can grow revenues and reduce costs, whilst exporting increases firms’ customer base, and therefore their profits.
This leaves many firms in the awkward position of knowing there are profitable international transactions out there for them to conduct, but being unable to free up the capital from their businesses’ existing accounts receivable to invest in them without taking great risks with their companies’ assets and cash flow.
Trade financiers have the tools and the expertise to manage both these issues and help both importers and exporters invest in profitable international ventures.
At first glance, trade finance offers huge benefits to all parties involved in an international transaction.
Importers can invest in profitable new international ventures without extracting capital from their business or compromising cash flow, and can repay the finance using profits generated from their imported receivable on lengthy repayment terms, whilst suppliers receive payment as soon as goods are dispatched.
Both also benefit from the security of a middleman who enforces their contractual obligations and insures them against non-payment.
While there are several advantages of using Trade Finance there can be disadvantages to using trade finance as well, which usually result from lack of awareness about the product.
In this article we look at the disadvantages of Trade Finance and offer five key pieces of advice to avoid/overcome these disadvantages..
Trade Finance and Transport are intricately linked in the process of global trade..
In Part 3 of the Trade Finance series, we take a look at how these two are linked and how it impacts on global trade as a whole.. We discuss the strategy to be used, the risks and how to mitigate them, how to secure and execute your transactions and how to drive your business profits..
The collateral obligations, repayment terms and risk thresholds of conventional lenders can make finance difficult to access for firms looking to begin or expand international trade ventures.
Trade finance enables firms to undertake such ventures, generating revenue growth and securing higher profits for firms operating in various industries.
Moreover, by providing trade-specific financial products overseen by industry expertise, trade financiers help firms overcome the challenges inherent in international trade. In doing so, trade finance offers three major advantages to these firms.
Many businesses rely on lending to finance new ventures, reduce their financial exposure or manage their cash flow..
Trade financiers provide or identify sources of capital for firms seeking to invest in international trade and create structures for them to access it.. But what exactly is Trade Finance and how does it all work..??
This article is part of an introductory series about trade finance, where we look at the advantages of trade finance, the ways trade finance can be structured, and the products underpinning import and export transactions..