Trade Finance - in practice.
The decision whether to extend credit terms to your client abroad will be based on a number of factors - market expectations, competition, customers demands, risk and of course your own cash flow situation. Even if you are fortunate enough to be in a market where you can dictate COD terms there is still likely to be some delay in the actual payment reaching your account. Your trade financing should be planned to cover the cash gap - the gap between either the contract agreement or shipment and receiving payment.
Whether you will be able to get trade finance will in itself depend on the banks view of the export transaction(s).For instance the financial standing of you and your buyer, the economic and political situation in the buyers country, terms of payment and whether the transaction is covered by credit insurance.
This material has been provided courtesy
of Obrico Ltd Global Trade & Finance.
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