Trade Financing & Bank Services

Abstract

There are many new and innovative ideas for trade financing, which will be key for many companies that have international business and sales. A new innovative financing tool for short term trade is based on open account terms. This is where the bank will purchase open account receivables based on a transaction (payment) or a revolving basis. This will allow exporters to export their product on an ongoing basis until the credit limit has been reached. Another short-term instrument, letters of credit, here the bank authorizes a letter on behalf of the buyer and gives it to the seller, which states that the buyer will pay the given amount in a prescribed amount of time. Medium term financing, also has its own instruments. The bank will be purchasing promissory notes and the exporter will receive the funds. Aforfait is another method of financing for trade. It is where exporters are looking for fixed rates on a non-recourse basis, it requires minimal documentation and avoids all risk for the exporter. Buyer credit, the buyer will create a lending agreement with the lending bank, supported by disbursement and pre-disbursement agreements and a series of promissory notes. All these new trade instruments are used in order to balance trade deficits, to accelerate economic development, decrease international debt, etc.