Your Opportunity and Trade Banking
You are looking to expand your product line and supply chain options. Covid wreaked havoc in your existing supply chain and now post-Covid demand is strong and you are needing to find more supply options.
After doing extensive research you have sourced options for your supply chain however a problem exists is that either you or your supplier is in or gets its product from a country that is politically unstable.
Everyone wants to do the deal however there is an advantage to you if you can find a finance solution way to mitigate the perceived risk of the instability so you can conclude your company finance and trade funding for your deal. What types of solutions are there?
Trade Finance Solutions
Trade finance can secure your deal from or into politically unstable countries by reducing the risk of non-or delayed payment. How, by engaging trade finance funding options to finance supply chain, your company can get access to the following:
4 Different Trade Finance and Trade Credit Instruments
There are 4 different common types of financial products, instruments, and practices that will provide the trade finance solutions for your company financing of your new deal.
1. Letters of Credit
A letter of credit (L/C) is a commitment by a bank to pay the seller if the buyer fails to do so. The L/C ensures that the seller receives payment even if the buyer is unable to pay due to political unrest or other issues. Thus if you are operating in a politically unstable country, sourcing a L/C will give comfort to suppliers to supply you and/or doing so at a better price.
2. Trade Guarantees
A trade guarantee is a type of financial instrument that provides assurance to one party in a trade transaction that the other party will fulfill its obligations. Trade guarantees are often used in international trade to mitigate the risks associated with cross-border transactions, particularly when one of the parties is located in a different country and has limited financial stability.
There are several types of trade guarantees, including performance guarantees, advance payment guarantees, and shipment guarantees. Performance guarantees are used to ensure that the seller will deliver the goods or services as specified in the contract. Advance payment guarantees protect the buyer’s advance payment in the event that the seller fails to perform. Shipment guarantees provide assurance that the shipment of goods will take place as agreed upon in the contract. Depending on your business criteria, using trade guarantees can be more cost effective than letters of credit.
3. Trade Insurance
Trade insurance is insurance that protects your business against financial loss which could occur from non-payment, fraud, shipping delays, or other circumstances such as political instability creating delay in performance.
The industry can provide credit insurance, political risk insurance, and marine insurance where credit insurance protects against non-payment by a buyer, political risk insurance covers losses resulting from events such as expropriation, currency inconvertibility, or political violence and marine insurance protects against loss during the shipping of goods.
Trade insurance covers off-risk in new cross-border transactions which if provided can create a better price point in the trade itself.
4. Performance Bonds
A performance bond is a form of guarantee provided by a third-party financial institution that underwrites that the seller/principal will fulfill its obligations under a contract to deliver the goods of the specified quality, on time, and at the agreed price and if not, then to provide compensation to the buyer.
In international trade finance, performance bonds mitigate risk and ensure contracts are performed especially where there are large contracts or complex supply chains which make it difficult for a buyer to assess the creditworthiness of a prospective supplier.
How we at International Trade Finance Solutions find your best solution!
Each transaction is unique and our team listens and investigates the best product solution for you at the best price. To find that solution we invoke the following strategies designed for international trade financing:
Smart Strategies we use in Trade Finance Solutions
Once your needs are clearly outlined, we
- Engage and pursue our contacts with reputable banks and well-known financial institutions whose stability gives comfort to the other party in your transaction to reduce the risk of default and ensure the stability of your trade finance arrangements.
- In certain cases we also can engage multilateral development banks such as the World Bank, the African Development Bank or the Export-Import Bank as they provide trade financing and investment guarantees that can help mitigate political risk and increase access to finance for companies engaged in international trade.
Need a Solution Right Now?
We are ready to assist and bring our team and contacts to finalize your contract with the best trade finance solution. What to know more or apply.