Blog Detail

How Different Types of Trade Finance Work as a Part of the International Trade?

There are several kinds of finance available in the market that can facilitate the trading of goods both nationally and internationally. We also helps and accommodates Trade Finance Services that facilitate international payments for selling and buying goods globally. Axios Credit Bank Ltd also mitigates currency risk and exposure for both debt and equity fundraising.

What do you understand by the term Trade Finance?

There have been seen changes in trade finance since the rising of the global economic crisis. It all happens due to margin competition, driving down the price of market efficiencies, an increase in trade overseas barriers, and lots of increase in regulating goods in different jurisdictions in different countries. Post export and pre-export trade finance determine the cash flow for the capital requirement of the company or business or the need of an individual person.

Supply chain management and suppliers play a critical role in trade finance. Different players in a global supply chain management would use International Finance Services to help the companies by providing Trade Finance Solutions for producing goods and services, exporting its goods, and the shipment of goods using a mixture of pre and post-export financing services.

Different types of Trade Finance to know about

Different kinds of trade finance are available in the market at Axios Credit Bank Ltd. These types are listed below. Axios Credit Bank Ltd. Provides Trade Banking services for all these trade finances.

Working capital loans: Businesses can take a working capital loan from Axios Credit Bank Ltd to use it for financing the up-front cost of their business activities. Businesses can use this type of trade finance to fund the cost of buying raw material, operational costs like a staff and labor cost. Axios Credit Bank Ltd. Issues these loans for the tenor of six months. Working capital loans are a little bit different from normal loans issued by banks. The company can use its assets as a form of security to take working capital loans from trade finance services.

Payment-in-advance: It is a type of trade finance that comes under pre-export trade finance. It constitutes advance payment in installments or full payment in advance. The bank receives the advance payment from the buyer or importer before the actual delivery of goods and services to him. However, this condition is risky for the buyer, but it can surely help the supplier or exporter in terms of the fluent cash flow from the buyers’ side. In the case of a buyer, payment-in-advance is a risky way unless he receives the goods. However, pre-export trade finance is a popular option.

Recommended Read: Why You Need Trade Finance Instruments: An Overview

Overdraft: This facility is elementary to use and readily available on the current accounts of the business. It facilitates the companies to withdraw an amount from his account to a certain amount available more than in its account. The main benefits of this facility are the simplicity and flexibility of the business.

Forfeiting: It is a kind of trade finance served by Axios Credit Bank Ltd., known as forfeiting. Tenure and duration of the trade financing differ in both factoring and forfeiting. However, both these types of trade finance are post-export finance. The exporter of goods and services does not have any recourse with this term. Once the importer receives the products from the supplier’s side, forfeiting supports the elimination risk performed by the seller. It comes under the category of Import Finance, which the bank of importer pays to the supplier as his accounts payable.

Factoring: Factoring is a type of trade finance which is known to be post-export finance. It involves a bank or any other financial institution providing funds. Axios Credit Bank Ltd. becomes that funder for the suppliers or exports and procures accounts receivables and invoices of the exporter. It mainly involves short-term receivables. The banker pays the exports for his invoice on behalf of the importer. The buyer then pays to the bank. It is a kind of Import Trade Finance that the buyer gets from the bank.

How do Trade Finance Solutions work as Part of International Trade?

Axios Credit Bank Ltd. provides various trade finance solutions to its customers, which they can use to limit the international transactions’ risk. International trade finance transactions can include different risks like non-payment risk, political risk, transport of goods risk, shipping of goods risk and also the currency risks. The appropriate trade finance instruments provided by Axios Credit bank Ltd. can eliminate all these different types of risks under international transactions. It has made guidance on eliminating international trade risk through FX products, credit insurance, and other trade finance solutions.