In the import and export business, several things should be in place for the transactions to remain productive. The level of cash flow, to a larger extent, determines how easy it will be to meet business objectives. For small businesses, this can be hectic as the export and import transaction calls for sustainable funding options. However, with the availability of trade finance as an option, the import and export business is becoming profitable. Highlighted below are the facts to note.

Trade Finance Offers Different Products and Services

There are several products and services that trade financiers offer to businesses that deal in import and export transactions. These products and services offered in trade finance help meet the needs and expectations of business persons and customers in the market. Letter of credit and bank guarantee are among the many products that trade financiers such as banks and credit unions offer.

Helps Reduce Payment Risk

When dealing in import and export transactions, the risks mostly lies in the payment process. You will be making payments to individuals or businesses you haven’t seen overseas. There is also no surety that the good you buy will reach the destination as you expected. However, trade finance has reduced the payment risk enabling an effective business transaction.

Helps Reduce Pressure on Importers and Exporters

For a long time, the financial gap between importers and exporters has been wide and unfit for productive business transactions. The exporters and importers are no longer afraid to engage and transact with their overseas partners to have sustainable cash flow through the funding they get from trade financiers.

Factoring Is Part of Trade Finance

With the need for effective cash flow increasing, importers and exporters need better ways to accelerate the transaction. Factoring invoices and inventories become an option. This is among one the quickest ways to get the funds approved. Trade financiers can now fund the businesses that opt to factor in their invoices or inventories.

Forfaiting Is Applicable in Trade Finance

An exporter can agree to sell their accounts receivables to a forfeiter in exchange for funds needed in the business. If the exporter owes an importer, the debt gets transferred to the forfeiter for collection. This also allows the importer to take goods on credit and sell them before paying the forfeiter.

If you are in the import and export business, you need an effective avenue to fund your venture. Call our professional team today and get guidance on trade finance.