Trade finance
Encyclopedia
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. Bank
s 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
, forfaiting
and others. 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.
International trade
International trade is the exchange of capital, goods, and services across international borders or territories. In most countries, such trade represents a significant share of gross domestic product...
.
While a seller (the exporter) can require the purchaser (an importer) to prepay for goods shipped
Shipping
Shipping has multiple meanings. It can be a physical process of transporting commodities and merchandise goods and cargo, by land, air, and sea. It also can describe the movement of objects by ship.Land or "ground" shipping can be by train or by truck...
, the purchaser (importer) may wish to reduce risk by requiring the seller to document the goods that have been shipped. Bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
s may assist by providing various forms of support. For example, the importer's bank may provide a letter of credit
Letter of credit
A standard, commercial letter of credit is a document issued mostly by a financial institution, used primarily in trade finance, which usually provides an irrevocable payment undertaking....
to the exporter (or the exporter's bank) providing for payment upon presentation of certain documents, such as a bill of lading
Bill of lading
A bill of lading is a document issued by a carrier to a shipper, acknowledging that specified goods have been received on board as cargo for conveyance to a named place for delivery to the consignee who is usually identified...
. 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
Documentary collection
A documentary collection is a process, in which the seller instructs his bank to forward documents related to the export of goods to the buyer's bank with a request to present these documents to the buyer for payment, indicating when and on what conditions these documents can be released to the...
, trade credit insurance
Trade Credit Insurance
Trade credit insurance, business credit insurance, export credit insurance, or credit insurance is an insurance policy and a risk management product offered by private insurance companies and governmental export credit agencies to business entities wishing to protect their balance sheet asset,...
, export factoring
Factoring (finance)
Factoring is a financial transaction whereby a business job sells its accounts receivable to a third party at a discount...
, forfaiting
Forfaiting
In trade finance, forfaiting involves the purchasing of receivables from exporters. The forfaiter takes on all risks involved with the receivables.Where are the independent and verifiable cites for this? Links? The forfaiting operation is a transaction-based operation involving the sale of one of...
and others. 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.
External links
- Trade Finance Guide: A Quick Reference for U.S. Exporters, U.S. International Trade Administration
- GTR - Global Trade Review
- Trade Finance magazine
- Trade Finance Community
- Iranian Trade Finance Community
- Federation of International Trade Associations
- @GlobalTrade Platform
- SmartStream Trade Process Automation
- Volante Trade Finance