What is Import or Trade Finance?
If you have large orders that need fulfilling from overseas suppliers/manufacturers there are many options…
In its simplest form, an exporter requires an importer to prepay for goods shipped. The importer naturally wants to reduce risk by asking the exporter to document that the goods have been shipped. The importer’s trade financier assists by providing a letter of credit to the exporter (or the exporter’s bank) providing for payment upon presentation of certain documents, such as a bill of lading. (source: tradefinancemagazine.com)
Below I have outlined the various ways in which AR Trade Finance can assist businesses in overseas transaction to fulfil current sales or future opportunities:
Purchase Order Finance
It works by considering your purchase order to be collateral, and providing a letter of credit straight to your supplier. Your supplier will usually ship directly to your end customer (who must be a trustworthy, established business or government entity). When your customer makes payment, the transaction is settled and you receive the proceeds.
Inventory Finance
Gives you the ability to fulfil all your sales orders, even those that exceed your normal in volume or scope. Up to 100% financing of your inventory costs frees-up your cash reserves for critical business expenses. This allows you to deliver bigger orders. Funding is generally based on forward orders and current stock values.
Letters of Credit
The Letter of Credit guarantees you that the supplier must perform, and perform on time, before it can ask to be paid. If the order is incomplete or late or has any number of various discrepancies, your company has the option to reject the shipment or refuse to pay.
Export Funding/Receivables
Waiting for payment from overseas customers can create enormous gaps in your cash flow cycles. Funding overseas invoices is part of our Trade Finance program. Typically once goods are accepted by your international customer up 80% of the value of your invoices can be released to you immediately, bringing forward your payment to assist in growth opportunities.
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