01.05.2024: INTERNATIONAL TRADE FINANCING
01.06.2022: INTERNATIONAL TRADE FINANCING
As international trade financing continues to evolve at a rapid pace, businesses now have more opportunities than ever – self-liquidating trading lines, cryptocurrencies, peer-to-peer lending and metals commodity have emerged as the latest trends today. But with these, the risks for traders have also increased. This is especially true where both the parties are trading together for the first time and trust has not yet built up. “Will my goods be delivered on time and as per the quality guidelines?” “Will I get full payment against delivery of goods?” These are some questions that hassle the importers and exporters.
International trade financing can help mitigate the risks involved in trading and build trust among the partners. Make sure you choose only a reputable banking or financial institution like SUISSE BANK that offers a wide range of trade financing solutions to its offshore clients. Here are some of the most widely used financial instruments that can make international trading a seamless experience.
1.Standby Letters of Credit
A Standby Letter of Credit is one of the most important documents you would need for trading beyond the boundaries. Through SBLC, the banking institution guarantees that all business obligations and conditions will be fulfilled even if the client ceases operations, becomes bankrupt, or is unable to meet the terms of the contract for whatever reason.
However, the beneficiary has to submit a payment demand in written and fulfil certain conditions, as mentioned in the trade agreement. All documents regarding the sale of goods and product ownership must be produced by exporter/ supplier/ seller to get full payment against SBLC. The letter of credit helps build the client’s financial credibility, which is one of the most important factors to trade.
2. Bank Guarantees
Through this financial instrument, the bank underwrites paying the full amount to the beneficiary on behalf of the client and if the latter is unable to do so for reasons whatsoever.
However, to get a Bank Guarantee for international trade financing, you must be eligible for the same. For instance, SUISSE BANK provides this financial instrument only to its approved clients. Different types of Bank Guarantees you can avail are Performance Bond, Payment Guarantee, Tender Guarantee, and Advance Payment Guarantee.
3. Documentary Letter of Credit
Through a Documentary Letter of Credit, the creditworthiness of a reputable bank or financial institution is transferred to the client, facilitating seamless export-import. Herein, the bank acknowledges fulfilling certain liabilities on behalf of the client and subject to meeting certain conditions as specified in the trade agreement.
4. Proof of Funds
The bank or financial institution provides a POF, stating the client has the financial credibility to perform a trading transaction or investment. It guarantees that the finance required for the investment is fully available and 100% lawful.
5. Warranties
Warranties often validate creditworthiness of the trader and provide a liquidity advantage in international trade financing. Different types of warranties you can avail are service warranty, performance warranty, rental payment warranty and advance payment warranty.
Leveraging these financial instruments will help build credibility as a trading partner. International trade financing through these instruments, as SUISSE BANK provides, also facilitates faster and hassle-free trading anywhere in the world.