| Finance |
|---|
Trade finance is related to international trade.
While a seller (the exporter) can require the purchaser (an importer) to prepay for goods shipped, the purchaser (importer) may wish to reduce risk by requiring the seller to document the goods that have been shipped. Banks may assist by providing various forms of support. For example, the importer's bank may provide 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. The exporter's bank may make a loan (by advancing funds) to the exporter on the basis of the export contract.
Other forms of trade finance can include Documentary collection, trade credit insurance, export factoring,and forfaiting. Some forms are specifically designed to supplement traditional financing, such as “transactional equity” (a product developed by IIG Capital LLC), which can assist the borrower in funding the downpayment required by a bank before it extends credit.[1] In many countries, trade finance is often supported by quasi-government entities known as export credit agencies that work with commercial banks and other financial institutions.
Trade finance refers to financing international trading transactions. In this financing arrangement, the bank or other institution of the importer provides for paying for goods imported on behalf of the importer.
|
|||||||||||||||||