Trade Finance & Its Advantages

Trade Finance

Trade finance refers to the products & financial instruments that are being used by banks or financial institutions to finance international trade deals. In other words, when an exporter requires an importer to be prepaid for the goods delivered to reduce the risk of payment failure, the importer’s bank provides exporters with a legal payment surety through a range of trade finance instruments. It shows the bank's legal commitment towards exporters regarding an on-time payment upon the presentation of certain documents, such as the Bill of Lading, etc.    

In short, trade finance services including Letter of Credit, Bank Guarantee or Standby LCs etc. make it easier for both the importers & exporters to enter into international trade transactions without associated overseas risks including non-payment & non-performance. Trade finance is a broad term that covers several financial products to provide payment security to the exporters. 

Advantages Of Trade Finance

The main agenda of trade finance is to bring a neutral & legal third party to make transactions safe & secure by taking out the payment & performance risks involved in global trade transactions. 

Trade finance assures exporters that they would be paid on time irrespective of the buyer’s financial capacity while on the other hand, it provides peace of mind to the importers that the exporters will be paid only after the shipment of goods. Here are some of the main advantages of trade finance:

1. Improves Cash Flow & Operational Efficiency - Trade finance helps exporters raise money as working capital to run their business operations until receiving final payment from the importers. Thus, it improves their cash flow and helps with operational efficiency.
   
   
2. Improves Sales & Profits - Since trade finance services provide suppliers with the buyer’s proof of credibility to pay on time while executing any deals, both parties can grow their business without stressing about payment risks.
   
   
3. Less Documentation - Unlike other types of bank loans, the process of obtaining trade finance services is quite easier and requires less documentation. 

Emerio Banque is one of the trusted financial institutions offering a range of trade finance instruments to global traders to secure global trade deals. Contact us now.

Letter of Credit Guide - Features, Importance & When To Use It

Being a global trader, you may have come across the term “Letter of credit” but you wonder what it is, how it works, and why do global traders need it? This Letter of credit guide can help you get your answers.

• What Is A Letter Of Credit?
• What Is The Need For Applying For A Payment Guarantee Letter?
• Features of Letters of Credit
• Importance of Letters of Credit
• Parties Involved In The Issuance of LC
• Types of Letter of credit
• How Does a Letter of Credit Work?
• Documents Required For LC
• Is There Any Difference Between a Loan and a Letter Of Credit?
• What Is The Difference Between A Bank Guarantee And A Letter Of Credit?
• When To Use A Letter Of Credit?
• Advantages of Letter of Credit in Global Trade Deal

Other Advantages of Letter of Credit

1. Letter of credit services allows parties-to-the-contract to trade with unfamiliar overseas parties and establish new trade opportunities.

2. Both importers and exporters can expand their business quickly in new geographical areas.

3. A letter of credit is a safe, customizable, and flexible type of import trade finance.

4. Both the importers and exporters can put their conditions in the LC agreement as per their convenience and requirements.

Trade finance instruments like an LC can significantly help you reduce foreign trade payment risks and allow you to enter into an international trade deal without any threat of payment failure. 

Read more: https://www.emeriobanque.com/blogs/letter-of-credit-guide-features-importance-when-to-use-it