Trade Financing

Security. Classification. & C.M.A.assoc. Partners Inc., and its alliance partners offer Trade Financing For Worldwide Commodities Projects.

Understanding your challenges, providing solutions in trade financing. The financing of international trade. Trade finance includes such activities as lending, issuing letters of credit, factoring, export credit and insurance. Companies involved with trade finance include importers and exporters, banks and financiers, insurers and export credit agencies, as well as other service providers. Trade finance is of vital importance to the global economy, with the World Trade Organization estimating that 80 to 90% of global trade is reliant on this method of financing. Although international trade has been in existence for centuries, trade finance developed as a means of facilitating it further. The widespread use of trade finance is one of the factors that have contributed to the enormous growth of international trade in recent decades.

In its simplest form, trade form works by reconciling the divergent needs of an exporter and importer. While an exporter would prefer to be paid upfront by the importer for an export shipment, the risk to the importer is that the exporter may simply pocket the payment and refuse shipment. Conversely, if the exporter extends credit to the importer, the latter may refuse to make payment or delay it inordinately.

The most common solution to this problem is through a letter of credit, which is opened in the exporter’s name by the importer through a bank in his or her home country. The letter of credit essentially guarantees payment to the exporter by the bank issuing the letter of credit upon receipt of documentary proof that the goods have been shipped. Although this is a somewhat cumbersome process, the letter of credit system is one of the most popular trade finance mechanisms.

In today’s world, keeping up is not enough. Competition, cost pressures, demands for greater efficiency and higher performance, and evolving regulations trigger new projects that require analysis, design and implementation. To stay on top of your game, you need expert advice from trusted partners who understand your needs and can design and implement the best solution for your business. In the absence of an adequate trade finance infrastructure is, in effect, equivalent to a barrier to trade. Limited access to financing, high costs, and lack of insurance or guarantees are likely to hinder the trade and export potential of an economy, and particularly that of small and medium size enterprises.

At times like these, it’s comforting to know that Security. Classification. & C.M.A.assoc. Partners Inc., and its alliance partners. Consulting Services can help. Our consultants have delivered over 500 technical and business projects for nearly 400 clients in more than 75 countries. Every day they help companies like yours reduce costs and risk and enable business growth and regulatory compliance. Our Consulting Services portfolio has an answer to a wide range of business challenges.

Security. Classification. & C.M.A.assoc. Partners Inc. and its alliance partner US. Based business and financial consulting firm which specializes in assisting U.S. and foreign exporters in obtaining financing for the buyers of their capital goods and services. Security. Classification. & C.M.A.assoc. Partners Inc., and its alliance partners through its network of American and foreign commercial banks and sovereign export guarantee agencies, assists both the manufacture/exporter in arranging financing at preferred terms for the project sponsor/importer of its capital goods and services, and/or the project sponsor in qualifying for and obtaining the necessary financing. Security. Classification. & C.M.A.assoc. Partners Inc., and its alliance partners can identify the optimal source of financing for the required capital equipment and services, based on the country of origin, the commercial/industrial sector, the type of equipment or services needed, and the location of the project.

Security. Classification. & C.M.A.assoc. Partners Inc., and its alliance partners personnel are experienced in trade financing, deals structuring, international and commercial law and issues related to currency convertibility. We assist our clients in structuring an optimal financing strategy. We then prepare the loan proposal, make the presentations, and work directly with interested financial institutions to obtain the most advantageous and preferred terms and conditions, as well as to expedite the closing. Security. Classification. & C.M.A.assoc. Partners Inc. and its alliance partners trade facilitation aims at reducing transaction cost and time by streamlining trade procedures and processes. One of the most important challenges for traders involved in a transaction is to secure financing so that the transaction may actually take place. The faster and easier the process of financing an international transaction, the more trade will be facilitated. Traders require working capital (i.e., short-term financing) to support their trading activities.

Exporters will usually require financing to process or manufacture products for the export market before receiving payment. Such financing is known as pre-shipping finance. Conversely, importers will need a line of credit to buy goods overseas and sell them in the domestic market before paying for imports. In most cases, foreign buyers expect to pay only when goods arrive, or later still if possible, but certainly not in advance. They prefer an open account, or at least a delayed payment arrangement. Being able to offer attractive payments term to buyers is often crucial in getting a contract and requires access to financing for exporters.

Letters of Credit

There are many types of financial tools and packages designed to facilitate the financing of Trade transactions. Trade Financing Instruments, Export Credit Insurances; and Export Credit Guarantees.

Documentary Credit

This is the most common form of the commercial Letter of credit. The issuing bank will make payment, either immediately or at a prescribed date, upon the presentation of stipulated documents. These documents will include shipping and insurance documents, and commercial invoices. The documentary credit arrangement offers an internationally used method of attaining a commercially acceptable undertaking by providing for payment to be made against presentation of documentation representing the goods, making possible the transfer of title to those goods.

Export Letters of Credit

The Import Letter of Credit process begins when an importer and an exporter agree to use a Letter of Credit as the method of payment for the shipment of merchandise.
See how Security. Classification. & C.M.A.assoc. Partners Inc. and its alliance partner’s trade facilitation can help you with your needs of export letters of credit. Letter of Credit* need to be confirmed or advised (referred to as an Export Letter of Credit), it first verifies the authenticity of the Letter of Credit, then notifies the exporter that a Letter of Credit has been issued in the exporter’s favor. Security. Classification. & C.M.A.assoc. Partners Inc. and its alliance partner’s providers will notify its exporting client the same day as the Letter of Credit is received. A copy of the Letter of Credit is faxed, mailed, or can be picked up, depending on the wishes of the exporter. Before shipping the merchandise, the exporter reviews the Letter of Credit to make sure that it conforms to all the terms of the sale and that all requirements can be met. If the conditions cannot be met, the exporter must ask the importer to have its bank issue an amendment prior to shipment. Security. Classification. & C.M.A.assoc. Partners Inc. and its alliance partners handle hundreds of Export Letters of Credit a year.

Services include:

  • Same-day notification.
  • Competitive advisement and negotiated rates.
  • Confirmations at competitive rates.
  • Assistance with technical features of the Letter of Credit.

Standby Letters of Credit

A Standby Letter of Credit represents an obligation of Security. Classification. & C.M.A.assoc. Partners Inc., and its alliance partners to the beneficiary of the credit. The expectation is that the underlying transaction will be completed as agreed and the Standby Letter of Credit will not be drawn. The major difference between a Commercial and a Standby Letter of Credit is that a Commercial Letter of Credit (Import or Export) is a payment method for a trade transaction whereas a Standby Letter of Credit supports the payment of a debt, which debt may or may not be trade related.

Security. Classification. & C.M.A.assoc. Partners Inc., and its alliance partners works with its clients to assure that the terms of the Letter of Credit reflect the negotiations of the parties. A Standby Letter of Credit can be used for many purposes, including a bid bond, a performance bond, or support for a loan or unpaid invoices made on an open account shipment. Security. Classification. & C.M.A.assoc. Partners Inc. and its alliance partner are experienced in issuing Standby Letters of Credit, and have issued these instruments for a wide variety of purposes both domestic and international.

TRANSFERABLE LETTER OF CREDIT

A Transferable Letter of Credit is simply a letter of credit that permits the beneficiary of the credit to make some or all of the credit available to another party, thereby creating a secondary beneficiary. When you are an exporter serving as an intermediary, you may receive a letter of credit from a buyer in your favor to secure the purchase of goods to be exported. If the letter of credit allows you the ability to transfer the credit, you may wish to partially or fully transfer it to the manufacturer or provider of goods.

ASSIGNMENT OF PROCEEDS

An Assignment of Proceeds can provide you with a vehicle for reselling goods without using your source of credit or funds. When exporting, you may be purchasing products from a manufacturer or provider of goods. As you receive a letter of credit from a buyer in your favor, it may be possible to assign partial proceeds of the credit to the provider of goods, so that you may secure the product and ship to buyer to fulfill the credit terms for payment. As the credit remains in your favor, you have full control over the shipment and payment. Upon meeting the credit’s terms and conditions, the assigned amount and any net amount due to you would be paid in accordance with credit terms.

Trade and supply chain finance

Security. Classification. & C.M.A.assoc. Partners Inc. and its alliance partner our experienced teams provide a wide range of trade finance services, for both importers and exporters. Our network of local relationship directors work alongside our trade teams to offer the most appropriate forms of finance to help optimize use of working capital as part of your supply chain.

Supplier Finance

Security. Classification. & C.M.A.assoc. Partners Inc., and its alliance partner your suppliers can obtain early payment of their invoices over our supplier finance platform, giving them greater access to invaluable working capital.

Pre-Shipment Finance

If you have a confirmed order from a quality buyer backed by a documentary credit, we may be able to provide you with the working capital you need to produce and ship the goods, giving you the reassurance of being able to take on new contracts and grow your business. Pre-shipment financing is especially important to Smaller enterprises because the international sales cycle is usually longer than the domestic sales cycle. Pre-shipment financing can take in the form of short- term loans, overdrafts and cash credits. It also provides additional working capital for the exporter.

Post-Shipment Finance, Import Finance

When you have shipped goods to a customer, we may be able to advance payment so you don’t have to wait for that customer to pay, giving access to capital to fund further operations. In some case our sources/providers can provide short-term finance linked to your trading cycle to enable you to pay your suppliers promptly but allowing time for you to re-sell the stock or undertake any capital expenditure required. Post-shipping financing can be for the period following shipment. The ability to be competitive often depends on the trader’s credit term offered to buyers. Post-shipment financing ensures adequate liquidity until the purchaser receives the products and the exporter receives payment.

Other means of Trade Financing

Counter-trade

In today s world most emerging economies face the problem of limited foreign exchange holdings. One way to overcome this constraint is to promote and encourage countertrade. Today’s modern counter trade appears in so many forms that it is difficult to devise a definition. It generally encompasses the idea of subjecting the agreement to purchase goods or services to an undertaking by the supplier to take on a compensating obligation. The seller is required to accept goods or other instruments of trade in partial or whole payment for its products.

Barter

This traditional type of counter-trade involving the exchange of goods and services against other goods and services of equivalent value, with no monetary exchange between exporter and importer.

Counter purchase

The exporter undertakes to buy goods from the importer or from a company nominated by the importer, or agrees to arrange for the purchase by a third party. The value of the counter purchase goods is an agreed percentage of the prices of the goods originally exported. Buy-back- the exporter of heavy equipment agrees to accept products manufactured by the importer of the equipment as payment.

Factoring

This involves the sale at a discount of accounts receivable or other debt assets on a daily, weekly or
Monthly basis in exchange for immediate cash. The debt assets are sold by the exporter at a discount to a factoring house, which will assume all commercial and political risks of the account receivable.

Buyer’s Credit

A financial arrangement whereby a financial institution in the exporting country extends a loan
Directly or indirectly to a foreign buyer to finance the purchase of goods and services from the exporting country. This arrangement enables the buyer to make payments due to the supplier under the contract.

Supplier’s Credit

Supplier credit is trade finance credit provided by the seller or exporter—or by a financial institution on the exporter’s behalf—to a foreign firm or government in the form of notes, receivables, or similar instruments. This nomenclature applies even though the exporter (supplier) obtains financing based on such buyer obligations, even if guaranteed by a bank or other entity in the buyer’s country. At least initially, the obligation appears as an asset on the books of the exporter.

Export Credit Insurance

ECI allows exporters to offer competitive open account terms to foreign buyers while minimizing the risk of non-payment. Even creditworthy buyers could default on payment due to circumstances beyond their control. With reduced non-payment risk, exporters can increase export sales, establish market share in emerging and developing countries, and compete more vigorously in the global market. When foreign accounts receivable are insured, lenders are more willing to increase the exporter’s borrowing capacity and offer more attractive financing terms. ECI does not cover physical loss or damage to the goods shipped to the buyer, or any of the risks for which coverage is available through marine, fire, casualty or other forms of insurance.