Why Is The Trade Finance Gap A Great Deal For Exporters?

Finance for international trade has a vital role for exporters all over the world when it comes to completing global foreign trade deals. Due to the associated overseas risks, exporters want to eliminate the payment risk, and thereby demand to be paid upon shipment, while importers are willing to pay only after receiving the ordered goods or services. Here, import/export finance narrows this time gap among parties through various financing options such as Letters of Credit, Bank Guarantee or Documentary Collections, etc. 

A suitable & wide range of access to global financial services provides them with the instant & required short-term working capital to complete the trade-deal-related tasks, that have been stuck due to lack of funds. It makes it one of the most important pillars of international trade & transactions among global traders. 

For many years, different banks & financial institutions have been minimizing the global trade finance gap and covering the risk of non-payment. The estimated risk is 0.2% on average worldwide with a little bit of variation across nations, highlighting international finance as an economic source of funding for SMEs. Currently, various credit & short-term payment guarantees cover around 80% of global trade with over $10 trillion in yearly flows, as shown by the Bank of International Settlements.

Originally Posted: https://www.emeriobanque.com/blogs/why-is-the-trade-finance-gap-a-great-deal-for-exporters