If you are an importer dealing in international trade & transactions, you may find this blog useful. The most common problem being faced by the importers in overseas trade deals is to pay their suppliers in advance or sometimes in very short terms even before they have been able to sell the ordered goods. Since the exporters/suppliers are not assured of getting on-time payment for their delivered goods & services, they demand upfront payment from the importers. Here, trade finance bridges the gap between importers & exporters by financing import transactions with an instant short-term fund.
Trade finance mitigates the risk of non-payments & non-performance in an international transaction by providing financing to the importers. But apart from this, availing of trade finance services has many other benefits also. What are they? Keep reading to know.
1. Exporters Get Payment Security - One of the primary and foremost benefits of trade finance is to provide an undertaking of payment to your suppliers and assure them that they would be paid on time for their delivered goods & services, regardless of your financial situation. When working with overseas suppliers, they are always at global trade payment risks. The involvement of a trade finance intermediary i.e Bank or FI provides them peace of mind as it takes the responsibility to cover the amount in the event if the buyer defaults.
2. Better Cash Flow Management - Many global traders involved in international trade transactions prefer to choose trade finance services even if they don’t need the money for backing the purchase. This is because trade finance is a great source of maintaining better cash flow for the business. By knowing that every supplier is paid upfront, and similarly will be paid on your terms when you want, brings a charge & control on your finances and ensures smooth financial operations.
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3. Convenient To Apply - Unlike other traditional bank services, you can apply for trade finance services easily & quickly with fewer documentation requirements. Trade finance agreements are simple, straightforward & easy to understand, so you can easily set up a trade finance account.
4. Flexibility - Another noticeable benefit of trade finance is that they provide you 100% flexibility in paying. To put it simply, the issuing bank provides importers with a credit facility to pay for the goods they have purchased from suppliers from anywhere in the world. Within that certain period, the importers can arrange funds and settle the balance with the bank.
5. Boost Business Growth & Efficiency - Trade finance allows importers to run their business operations & activities smoothly & uninterruptedly by providing them short-term working capital for purchasing goods & services and helps them initiate trade transactions with overseas suppliers. As a result, they are capable of increasing the efficiency & productivity of their businesses.
Recommended Read: Why Is International Trade Finance A Popular Choice Among SMEs?
6. Increased Revenues & Earnings - Since import trade transactions are backed & secured by legal & professional trade financiers, it enables buyers to book large purchase orders from overseas suppliers. As a result, it helps businesses expand their services in different corners of the world and increases their revenues and earnings through trade.
7. Better Negotiation With Suppliers - When you opt for trade finance services for your domestic or international trade deals, you get the chance of getting better terms of negotiation with your suppliers. This is highly beneficial as you get the opportunity to grow your business and make more profit.
Recommended Read: Why You Need Trade Finance Instruments: An Overview
The agenda of trade finance is to provide payment assurance to the overseas suppliers on the behalf of the importers as well as to enable importers to execute trade deals without lacking finance.