Trade Finance Services
Our leading trade finance team is an integral part of our international trade practice. Throughout Agriculture and Industry sectors, we handle commodities, general trade, export, supply chain or Collateral Management Agreements.
Trade finance represents the financial instruments and products that are used by companies to facilitate international trade and commerce. Trade finance makes it possible and easier for importers and exporters to transact business through trade. Trade finance is an umbrella term meaning it covers many financial products that banks and companies utilize to make trade transactions feasible.
Why Choose This Service
Trade finance ensures fewer delays in payments and in shipments allowing both importers and exporters to run their businesses and plan their cash flow more efficiently. Think of trade finance as using the shipment or trade of goods as collateral for financing the companies growth.
How Trade Finance Works
The function of trade finance is to introduce a third-party to transactions to remove the payment risk and the supply risk. Trade finance provides the exporter with receivables or payment according to the agreement while the importer might be extended credit to fulfill the trade order.
The parties involved in trade finance are numerous and can include:
- Trade finance companies
- Importers and exporters
- Export credit agencies and service providers
Trade financing is different than conventional financing or credit issuance. General financing is used to manage solvency or liquidity, but trade financing may not necessarily indicate a buyer’s lack of funds or liquidity. Instead, trade finance may be used to protect against international trade’s unique inherent risks, such as currency fluctuations, political instability, issues of non-payment, or the creditworthiness of one of the parties involved.
“Some 80% to 90% of world trade relies on trade finance…” – World Trade Organization (WTO)
Below are a few of the financial instruments used in trade finance:
- Lending lines of credit can be issued by banks to help both importers and exporters.
- Letters of credit reduce the risk associated with global trade since the buyer’s bank guarantees payment to the seller for the goods shipped. However, the buyer is also protected since payment will not be made unless the terms in the LC are met by the seller. Both parties have to honor the agreement for the transaction to go through.
- Factoring is when companies are paid based on a percentage of their accounts receivables.
- Export credit or working capital can be supplied to exporters.
- Insurance can be used for shipping and the delivery of goods and can also protect the exporter from nonpayment by the buyer.
Although international trade has been in existence for centuries, trade finance facilitates its advancement. The widespread use of trade finance has contributed to international trade growth.
The information in this content is not advice on legal, tax, investment, accounting, regulatory, technology or other matters. You should always consult your own financial, legal, tax, accounting or similar advisors before making any financial or investment decisions, or entering into any agreement with BCI. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained on our Site constitutes a solicitation, recommendation, endorsement, or offer by BCI or any third party service provider to buy or sell any investment or financial instruments in this or in in any other jurisdiction in which such solicitation or offer would be unlawful under the laws of such jurisdiction.