Trade finance venu reddy
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This document discusses trade finance products and services. It describes letters of credit, bank guarantees, export, and import. Letters of credit are undertakings by a bank to make payment to an exporter if they present complying documents. Bank guarantees are undertakings by a bank on behalf of an applicant to make payment to a beneficiary if the applicant fails to meet obligations. Common methods of international payment discussed are cash in advance, letters of credit, bills for collection, and open account.
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Foreign trade financing.st
This document discusses key elements of international trade finance, including import/export transactions, documentation, and financing sources. It covers the three main documents in trade - bills of lading, commercial invoices, and insurance documents. Private sources of export financing include letters of credit, bills of exchange, banker's acceptances, and discounting/factoring of receivables. Public sources are export credit insurance and financing from the Export-Import Bank. The document explains concepts like irrevocable vs revocable letters of credit, sight vs time drafts, and the roles of importer, exporter and banks in international trade finance.
Documentary collection
Documentary collection is one of the widely used payment methods in international trade. Partes involved in collections, types etc are discussed further in the presentation.
Payment Terms In International Trade !
This document discusses different payment methods for international trade, including cash in advance, letters of credit, documentary collections, and open account. It explains that importers want to receive goods quickly but delay payment as long as possible. Letters of credit and documentary collections provide more security for sellers by requiring documents be submitted before goods or payment are released. Cash in advance provides maximum security but no guarantee goods will be shipped. Open account has the least security and highest risk of non-payment for sellers. The document aims to help exporters choose a payment method that minimizes risk while accommodating buyers' needs.
Documentary collections
Documentary collections offer banks a payment mechanism that allows simultaneous payment and transfer of title through an exchange of shipping documents. The importer is not required to pay until the documents are received. The remitting bank sends documents to the collecting bank, which releases documents to the importer only upon payment or acceptance of a draft. This allows the exporter to retain title until payment while enabling the importer to receive goods without prepayment. Risks include non-payment by the importer or receipt of defective goods, so documentary collections require a level of trust between parties.
Trade Finance Basics
The document discusses various types of trade finance instruments including letters of credit, bills of exchange, and guarantees. It provides details on how letters of credit work, involving an importer, exporter, issuing bank, advising bank, and reimbursing bank. The key parties and processes are defined. It also explains the different types of guarantees commonly used in international trade, including bid guarantees, advance payment guarantees, and performance guarantees. The mechanics of how a transaction involving a guarantee is processed between the applicant, issuing bank, advising bank, and beneficiary are outlined.
IB slides, International Business, Payment method for international trade.
payment methods for international trade.
open account
prepayment
LC
consignment
Draft
Comparison of methods.
Documentary Collections
This document discusses documentary collections, which involve banks carrying out instructions to pay for goods under financial and commercial documents. There are two main types: documentary against payment (D/P), where the buyer does not get goods until paying, and documentary against acceptance (D/A), which allows a credit period. For exporters, documentary collections ensure payment before releasing goods, though buyers could refuse documents and banks assume no risk. For importers, they ensure shipment of goods before requiring payment. The process involves instructions between remitting, collecting, and presenting banks according to international rules.
Methods of payment in International trade
This document discusses various methods of payment for export sales, including cash in advance, open account, letters of credit, sight bills, and usance bills. Cash in advance requires upfront payment before goods are shipped. Open account allows goods to be shipped before payment is due, usually within 30-90 days, but carries the highest risk for exporters. Letters of credit provide a bank guarantee of payment if terms are met. Sight bills require payment on delivery of documents, while usance bills allow acceptance of payment within an agreed credit period after delivery.
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Foreign trade financing.st
This document discusses key elements of international trade finance, including import/export transactions, documentation, and financing sources. It covers the three main documents in trade - bills of lading, commercial invoices, and insurance documents. Private sources of export financing include letters of credit, bills of exchange, banker's acceptances, and discounting/factoring of receivables. Public sources are export credit insurance and financing from the Export-Import Bank. The document explains concepts like irrevocable vs revocable letters of credit, sight vs time drafts, and the roles of importer, exporter and banks in international trade finance.
Documentary collection
Documentary collection is one of the widely used payment methods in international trade. Partes involved in collections, types etc are discussed further in the presentation.
Payment Terms In International Trade !
This document discusses different payment methods for international trade, including cash in advance, letters of credit, documentary collections, and open account. It explains that importers want to receive goods quickly but delay payment as long as possible. Letters of credit and documentary collections provide more security for sellers by requiring documents be submitted before goods or payment are released. Cash in advance provides maximum security but no guarantee goods will be shipped. Open account has the least security and highest risk of non-payment for sellers. The document aims to help exporters choose a payment method that minimizes risk while accommodating buyers' needs.
Documentary collections
Documentary collections offer banks a payment mechanism that allows simultaneous payment and transfer of title through an exchange of shipping documents. The importer is not required to pay until the documents are received. The remitting bank sends documents to the collecting bank, which releases documents to the importer only upon payment or acceptance of a draft. This allows the exporter to retain title until payment while enabling the importer to receive goods without prepayment. Risks include non-payment by the importer or receipt of defective goods, so documentary collections require a level of trust between parties.
Trade Finance Basics
The document discusses various types of trade finance instruments including letters of credit, bills of exchange, and guarantees. It provides details on how letters of credit work, involving an importer, exporter, issuing bank, advising bank, and reimbursing bank. The key parties and processes are defined. It also explains the different types of guarantees commonly used in international trade, including bid guarantees, advance payment guarantees, and performance guarantees. The mechanics of how a transaction involving a guarantee is processed between the applicant, issuing bank, advising bank, and beneficiary are outlined.
IB slides, International Business, Payment method for international trade.
payment methods for international trade.
open account
prepayment
LC
consignment
Draft
Comparison of methods.
Documentary Collections
This document discusses documentary collections, which involve banks carrying out instructions to pay for goods under financial and commercial documents. There are two main types: documentary against payment (D/P), where the buyer does not get goods until paying, and documentary against acceptance (D/A), which allows a credit period. For exporters, documentary collections ensure payment before releasing goods, though buyers could refuse documents and banks assume no risk. For importers, they ensure shipment of goods before requiring payment. The process involves instructions between remitting, collecting, and presenting banks according to international rules.
Methods of payment in International trade
This document discusses various methods of payment for export sales, including cash in advance, open account, letters of credit, sight bills, and usance bills. Cash in advance requires upfront payment before goods are shipped. Open account allows goods to be shipped before payment is due, usually within 30-90 days, but carries the highest risk for exporters. Letters of credit provide a bank guarantee of payment if terms are met. Sight bills require payment on delivery of documents, while usance bills allow acceptance of payment within an agreed credit period after delivery.
International trade finance
This document discusses various methods for financing international trade transactions, including letters of credit, standby letters of credit, and alternative performance guarantees. Letters of credit are issued by banks to guarantee payment by the buyer or performance by the seller. The Uniform Customs and Practices for Documentary Credits provide standard rules for letters of credit. Standby letters of credit are used to secure contractual obligations. Alternative guarantees include performance bonds, bid bonds, and credit sureties. Sources of trade finance include commercial banks, export financing programs, and government assistance agencies.
International business export finance
This document discusses export finance and its instruments. It begins by defining pre-shipment finance as financing for the purchase, processing or packing of goods meant for export, while post-shipment finance refers to assistance provided after goods have been shipped. To be eligible, the exporter or supplier of goods to designated agencies must be involved. Common needs in export financing include mitigating risks of non-completion and ensuring payment. Key instruments discussed are letters of credit issued by importers' banks to pay exporters, drafts/bills of exchange ordering payment, and bills of lading serving as receipts, contracts and documents of title.
methods of payment in international trade
The document discusses various payment methods in international trade, including cash-in-advance, letters of credit, and documentary collections. Cash-in-advance requires upfront payment but provides no risk to exporters. Letters of credit involve banks and shift risk between buyers and sellers. Documentary collections are less complex than letters of credit but provide limited recourse if payment is not made. The key methods, their characteristics, and transaction flows are outlined.
Methods of payment
The document discusses various methods of payment used in international trade. It describes cash in advance, where payment is received before shipment of goods; letters of credit, where a bank guarantees payment to the exporter if documents are presented; and documentary collections, where banks facilitate payment from the importer to exporter after shipment. It outlines the parties involved in letters of credit and the typical process. The advantages and disadvantages as well as suitability of each payment method is explained. Examples are provided of industries that commonly use certain methods. Factors related to wire transfers, credit cards, and checks are also summarized.
Trade Finance and Structured Trade Finance
The Trade Finance and Structured Trade Finance presentation made at the NIC Entrepreneur Workshop on 28th May 2014
Settlement of import trade transactions
The document discusses various methods for settling import trade transactions: consignment purchase, cash in advance, down payment, open account, documentary collections, and letters of credit. Consignment purchase allows payment by the importer only after goods are sold to end users, providing most advantage to importers but most risk to suppliers. Cash in advance requires upfront payment by importers before shipment, placing all risk on importers. Down payment involves an initial portion of costs paid upfront with the option to use other methods to cover remaining costs. Open account allows shipment before payment is due, placing title and risk of default on sellers.
International Contracting And Import Finance 1
The document discusses various methods of payment in international trade contracts including cash payment, documentary collection, letter of credit, open account, and consignment. It describes key terms like advance payment, documentary collection, letter of credit, open account, and shipment on consignment. Modes of payment like supplier's credit and buyer's credit are also covered along with the requirement for working capital in international trade finance.
Payment modes
International payment methods provide security for international trade transactions. The main methods include letters of credit, documentary collections, bills of exchange, and open accounts. Letters of credit provide the highest security and involve a bank guarantee of payment if documents are presented on time. Documentary collections provide more security than open accounts but less than letters of credit by requiring documents before releasing goods. The payment method chosen depends on balancing security, cost, and risk assumed by buyers and sellers.
Chapter 19
This document discusses various methods for financing international trade, including payment methods, trade financing, and agencies that promote trade. It describes common payment methods like prepayments, letters of credit, drafts, consignments and open accounts. It also outlines various trade financing methods such as accounts receivable financing, factoring, letters of credit, banker's acceptances, working capital financing and countertrade. Finally, it discusses government agencies and private organizations that offer export credit, financing and insurance programs to support international trade, including the Export-Import Bank of the US, PEFCO and OPIC.
International methods of payment
The document discusses international payment methods, outlining the most common options including open account, direct transfer, check, letter of credit, collection, and bill of exchange. It notes that the choice of payment method depends on the risk assumed by the parties and cost of the transaction. A chart also compares the different methods on a scale of security of payment versus risk of non-payment.
Documentary collection letters of credit
The document discusses various methods for reducing credit risk in international sales transactions, including bank collections, trade finance, and letters of credit. It provides definitions and explanations of bank collections, trade finance, documentary drafts, letters of credit, and related concepts. The focus is on how these methods work to transfer credit risk from the seller to a bank by having the bank guarantee payment to the seller upon presentation of required documents.
Method of payment
There are 3 main methods of payment in international trade: clean payment, collection of bills, and letters of credit. Clean payment involves direct handling of documents between trading partners with a limited role for banks. It offers a cheap option but the exporter assumes risks. Collection of bills involves banks handling documents with options for release against payment or acceptance. Letters of credit are a written undertaking from the importer's bank to pay the exporter up to a stated amount against stipulated documents, and can be revocable or irrevocable, for sight or time, and confirmed.
Import and export payment methods
World Bank plays role as an admin and controls imports & exports among various countries. It sets certain required rules to be guided by facilitating payment procedures by means of IBRD and IDA.These are the two branches that control the transactions of funds very efficiently without causing any tiff between the importer and the exporters.
Terms of payment
The document discusses various payment terms used in international trade: cash in advance, letter of credit, documentary collection, consignment, and open account. It provides details on the process and risks involved for exporters and importers for each payment method. A letter of credit is described as the most secure option, where payment is guaranteed by the importer's bank within a specified time upon presentation of shipping documents. The risks shift from the exporter to the importer the further down the list the payment terms move from cash in advance to open account.
Foreign trade finance
Trade finance is used to mitigate risks in international trade transactions. It exists to reduce payment risk, country risk, and corporate risk. Payment risk is the risk that an exporter will not be paid in full or on time. Country risk refers to risks associated with doing business in a foreign country, such as exchange rate and political risks. Corporate risk relates to the creditworthiness and payment history of the importing/exporting company. Common trade finance tools include letters of credit, documentary collections, open accounts, trade loans, and factoring. Import financing provides credit to importers, while export financing supports exporters. Common import finance types are usance letters of credit, bank guarantees, and invoice financing. Export finance occurs both before and
Getting Paid in International Trade
Mike Filchock's powerpoint slides from his presentation at Fayette County's Exporting 101 Seminar. Mike is with SunTrust Bank's Global Trade Solutions Department.
Method of payment
This document discusses various methods of payment used in international trade. It describes five common methods: open account, bills of exchange, cash in advance, letter of credit, and documentary collection.
For open account, payment is due 30-90 days after shipment, providing credit but also risk if the importer does not pay. Bills of exchange involve a draft directing payment, allowing credit while establishing debt evidence. Cash in advance requires full payment before shipment, eliminating risk for exporters but being unattractive to importers. Letter of credit and documentary collection both involve banks and documents to facilitate trade while mitigating risks for both parties.
Export import trade financing, BMO
The document provides an overview of BMO Capital Markets' Trade Finance and China Sales Team. It summarizes that the team serves corporate and commercial clients in North America and China, offering a range of trade finance products and expertise in global trade. Key services highlighted include letters of credit, collections, supply chain finance, structured trade finance, and the Ex-Im Bank Working Capital Guarantee Program which provides lenders a 90% guarantee on export-related working capital loans. Contact information is provided for inquiries.
Import export
For all the quires contact me my Email id :- vijayyadav1208@gmail.com
for mor update like me, share , follow me
International business unit9
This document discusses documentary collections and trade finance facilities. It describes how collections work, with an exporter shipping goods and obtaining shipping documents, which are handed over along with a bill of exchange to their bank. The bank then sends the documents to the importer's bank for release against payment or acceptance. It also discusses sight and term drafts, the Uniform Rules for Collections, and the different types of documents involved in trade, including financial documents, commercial documents, and transport documents. Banks deal only in documents and not the actual goods.
Dynamics of Documentary Credit
The document discusses international trade payment methods and letters of credit. It describes key parties in a letter of credit transaction including the applicant, issuing bank, beneficiary, advising bank, confirming bank, and nominated bank. It explains how a letter of credit transaction works in 11 steps and defines major documents used in letters of credit like bills of lading, certificates of origin, and commercial invoices. The types of letters of credit are also defined as revocable or irrevocable.
Import procedure and finance
The document discusses various import procedures and financing methods. It begins by outlining the key steps in the import process: 1) obtaining licenses, 2) placing orders and sending indents, 3) obtaining foreign exchange, 4) arranging payment, and 5) paying customs duties. It then examines various payment methods including letters of credit, documentary collections, cash-in-advance, and open accounts. It also discusses bills of lading and the roles of various parties in a letter of credit transaction.
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This document discusses various methods for financing international trade transactions, including letters of credit, standby letters of credit, and alternative performance guarantees. Letters of credit are issued by banks to guarantee payment by the buyer or performance by the seller. The Uniform Customs and Practices for Documentary Credits provide standard rules for letters of credit. Standby letters of credit are used to secure contractual obligations. Alternative guarantees include performance bonds, bid bonds, and credit sureties. Sources of trade finance include commercial banks, export financing programs, and government assistance agencies.
International business export finance
This document discusses export finance and its instruments. It begins by defining pre-shipment finance as financing for the purchase, processing or packing of goods meant for export, while post-shipment finance refers to assistance provided after goods have been shipped. To be eligible, the exporter or supplier of goods to designated agencies must be involved. Common needs in export financing include mitigating risks of non-completion and ensuring payment. Key instruments discussed are letters of credit issued by importers' banks to pay exporters, drafts/bills of exchange ordering payment, and bills of lading serving as receipts, contracts and documents of title.
methods of payment in international trade
The document discusses various payment methods in international trade, including cash-in-advance, letters of credit, and documentary collections. Cash-in-advance requires upfront payment but provides no risk to exporters. Letters of credit involve banks and shift risk between buyers and sellers. Documentary collections are less complex than letters of credit but provide limited recourse if payment is not made. The key methods, their characteristics, and transaction flows are outlined.
Methods of payment
The document discusses various methods of payment used in international trade. It describes cash in advance, where payment is received before shipment of goods; letters of credit, where a bank guarantees payment to the exporter if documents are presented; and documentary collections, where banks facilitate payment from the importer to exporter after shipment. It outlines the parties involved in letters of credit and the typical process. The advantages and disadvantages as well as suitability of each payment method is explained. Examples are provided of industries that commonly use certain methods. Factors related to wire transfers, credit cards, and checks are also summarized.
Trade Finance and Structured Trade Finance
The Trade Finance and Structured Trade Finance presentation made at the NIC Entrepreneur Workshop on 28th May 2014
Settlement of import trade transactions
The document discusses various methods for settling import trade transactions: consignment purchase, cash in advance, down payment, open account, documentary collections, and letters of credit. Consignment purchase allows payment by the importer only after goods are sold to end users, providing most advantage to importers but most risk to suppliers. Cash in advance requires upfront payment by importers before shipment, placing all risk on importers. Down payment involves an initial portion of costs paid upfront with the option to use other methods to cover remaining costs. Open account allows shipment before payment is due, placing title and risk of default on sellers.
International Contracting And Import Finance 1
The document discusses various methods of payment in international trade contracts including cash payment, documentary collection, letter of credit, open account, and consignment. It describes key terms like advance payment, documentary collection, letter of credit, open account, and shipment on consignment. Modes of payment like supplier's credit and buyer's credit are also covered along with the requirement for working capital in international trade finance.
Payment modes
International payment methods provide security for international trade transactions. The main methods include letters of credit, documentary collections, bills of exchange, and open accounts. Letters of credit provide the highest security and involve a bank guarantee of payment if documents are presented on time. Documentary collections provide more security than open accounts but less than letters of credit by requiring documents before releasing goods. The payment method chosen depends on balancing security, cost, and risk assumed by buyers and sellers.
Chapter 19
This document discusses various methods for financing international trade, including payment methods, trade financing, and agencies that promote trade. It describes common payment methods like prepayments, letters of credit, drafts, consignments and open accounts. It also outlines various trade financing methods such as accounts receivable financing, factoring, letters of credit, banker's acceptances, working capital financing and countertrade. Finally, it discusses government agencies and private organizations that offer export credit, financing and insurance programs to support international trade, including the Export-Import Bank of the US, PEFCO and OPIC.
International methods of payment
The document discusses international payment methods, outlining the most common options including open account, direct transfer, check, letter of credit, collection, and bill of exchange. It notes that the choice of payment method depends on the risk assumed by the parties and cost of the transaction. A chart also compares the different methods on a scale of security of payment versus risk of non-payment.
Documentary collection letters of credit
The document discusses various methods for reducing credit risk in international sales transactions, including bank collections, trade finance, and letters of credit. It provides definitions and explanations of bank collections, trade finance, documentary drafts, letters of credit, and related concepts. The focus is on how these methods work to transfer credit risk from the seller to a bank by having the bank guarantee payment to the seller upon presentation of required documents.
Method of payment
There are 3 main methods of payment in international trade: clean payment, collection of bills, and letters of credit. Clean payment involves direct handling of documents between trading partners with a limited role for banks. It offers a cheap option but the exporter assumes risks. Collection of bills involves banks handling documents with options for release against payment or acceptance. Letters of credit are a written undertaking from the importer's bank to pay the exporter up to a stated amount against stipulated documents, and can be revocable or irrevocable, for sight or time, and confirmed.
Import and export payment methods
World Bank plays role as an admin and controls imports & exports among various countries. It sets certain required rules to be guided by facilitating payment procedures by means of IBRD and IDA.These are the two branches that control the transactions of funds very efficiently without causing any tiff between the importer and the exporters.
Terms of payment
The document discusses various payment terms used in international trade: cash in advance, letter of credit, documentary collection, consignment, and open account. It provides details on the process and risks involved for exporters and importers for each payment method. A letter of credit is described as the most secure option, where payment is guaranteed by the importer's bank within a specified time upon presentation of shipping documents. The risks shift from the exporter to the importer the further down the list the payment terms move from cash in advance to open account.
Foreign trade finance
Trade finance is used to mitigate risks in international trade transactions. It exists to reduce payment risk, country risk, and corporate risk. Payment risk is the risk that an exporter will not be paid in full or on time. Country risk refers to risks associated with doing business in a foreign country, such as exchange rate and political risks. Corporate risk relates to the creditworthiness and payment history of the importing/exporting company. Common trade finance tools include letters of credit, documentary collections, open accounts, trade loans, and factoring. Import financing provides credit to importers, while export financing supports exporters. Common import finance types are usance letters of credit, bank guarantees, and invoice financing. Export finance occurs both before and
Getting Paid in International Trade
Mike Filchock's powerpoint slides from his presentation at Fayette County's Exporting 101 Seminar. Mike is with SunTrust Bank's Global Trade Solutions Department.
Method of payment
This document discusses various methods of payment used in international trade. It describes five common methods: open account, bills of exchange, cash in advance, letter of credit, and documentary collection.
For open account, payment is due 30-90 days after shipment, providing credit but also risk if the importer does not pay. Bills of exchange involve a draft directing payment, allowing credit while establishing debt evidence. Cash in advance requires full payment before shipment, eliminating risk for exporters but being unattractive to importers. Letter of credit and documentary collection both involve banks and documents to facilitate trade while mitigating risks for both parties.
Export import trade financing, BMO
The document provides an overview of BMO Capital Markets' Trade Finance and China Sales Team. It summarizes that the team serves corporate and commercial clients in North America and China, offering a range of trade finance products and expertise in global trade. Key services highlighted include letters of credit, collections, supply chain finance, structured trade finance, and the Ex-Im Bank Working Capital Guarantee Program which provides lenders a 90% guarantee on export-related working capital loans. Contact information is provided for inquiries.
Import export
For all the quires contact me my Email id :- vijayyadav1208@gmail.com
for mor update like me, share , follow me
International business unit9
This document discusses documentary collections and trade finance facilities. It describes how collections work, with an exporter shipping goods and obtaining shipping documents, which are handed over along with a bill of exchange to their bank. The bank then sends the documents to the importer's bank for release against payment or acceptance. It also discusses sight and term drafts, the Uniform Rules for Collections, and the different types of documents involved in trade, including financial documents, commercial documents, and transport documents. Banks deal only in documents and not the actual goods.
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Import procedure and finance
The document discusses various import procedures and financing methods. It begins by outlining the key steps in the import process: 1) obtaining licenses, 2) placing orders and sending indents, 3) obtaining foreign exchange, 4) arranging payment, and 5) paying customs duties. It then examines various payment methods including letters of credit, documentary collections, cash-in-advance, and open accounts. It also discusses bills of lading and the roles of various parties in a letter of credit transaction.
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There are five major types of international payment methods used in business: 1) Documentary collections where a buyer's bank collects payment from the buyer after receiving an invoice from the seller. 2) Letters of credit where a bank guarantees payment to the seller upon presentation of shipping documents. 3) Cash against documents where payment is made after goods are shipped based on viewing shipping documents. 4) Open account trade where goods are shipped without immediate payment and the seller waits to receive payment after goods are sold. 5) Consignment where goods are shipped for sale by an agent with payment remitted after sale of goods.
ib 1.pptx
There are five major types of international payment methods used in business: 1) Documentary collections where a buyer's bank collects payment from the buyer after receiving an invoice from the seller. 2) Letters of credit where a bank guarantees payment to the seller upon presentation of shipping documents. 3) Cash against documents where payment is made after goods are shipped based on viewing shipping documents. 4) Open account trade where goods are shipped without immediate payment and the seller waits to receive payment after goods are sold. 5) Consignment where goods are shipped for sale by an agent with payment remitted after sale of the goods.
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The document discusses documentary collections and key concepts in international trade. It defines a documentary collection as a trade transaction where the exporter hands over documents like invoices and bills of lading to their bank for collection of payment. It outlines the key players in a collection like the principal, remitting bank, collecting bank, and drawee. It then describes the 8 step collection procedure and 3 main types of collections: documents against payment, documents against acceptance, and acceptance documents against payment. It concludes with notes on payment and monitoring the collection process.
Factoring
This document provides information on factoring and forfaiting. It defines factoring as the purchase of accounts receivables by a factoring company, which provides financing, debt collection services, and protects against bad debts. Forfaiting involves the outright sale of receivables to a forfaiter at a discounted price without recourse to the seller. The key differences between the two are that factoring is for ongoing arrangements, provides various services, and has no minimum transaction size, while forfaiting is for single transactions over $250k and only provides discounted financing without recourse.
Factoring & forfaiting
This document provides information on factoring and forfaiting. It defines factoring as the purchase of accounts receivables by a factoring company, which provides financing, debt collection services, and protects against bad debts. Forfaiting involves the outright sale of receivables to a forfaiter at a discounted price without recourse to the seller. The key differences between the two are that factoring is for ongoing arrangements, provides various services, and has no minimum transaction size, while forfaiting is for single transactions over $250k and only provides financing without recourse.
Letter of Credit
Letter of credit is a payment mechanism used in international trade to provide payment assurance for exporters. There are typically 6 parties involved - the importer/applicant, issuing bank, exporter/beneficiary, advising bank, negotiating bank, and confirming bank. The key steps are: 1) Importer applies to issuing bank for a letter of credit in favor of exporter. 2) Issuing bank opens the letter of credit. 3) Advising bank forwards the letter of credit to the exporter. 4) Exporter ships goods and submits documents to negotiating bank. 5) Negotiating bank pays exporter if documents comply with terms. 6) Documents are sent to issuing bank for reimbursement.
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A letter of credit is a contractual commitment by an importer's bank to pay an exporter once goods are shipped and documentation is provided, protecting both parties. Letters of credit are recommended for higher-risk international sales involving new relationships or extended payment terms. Exporters should consult their bank on costs and disputes before an importer applies for a letter of credit. The importer applies to their bank to open a letter of credit based on the sales agreement, which then transmits it to the exporter's bank for review and approval. The exporter ships goods and submits documents to their bank, which checks for compliance before submitting to the importer's bank for payment.
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This document discusses export financing options available to exporters in India. It describes pre-shipment financing, which provides working capital to purchase raw materials, process goods, and prepare for export. Post-shipment financing is also described, which provides credit after goods have been shipped until payment is received. Specific financing products like packing credit, clean packing credit, and running account facilities are explained. Requirements, periods of advance, and liquidation of pre-shipment credit are outlined. Financing of service exports is also briefly covered.
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Factoring and forfaiting are both forms of invoice financing for businesses. Factoring involves the purchase of accounts receivable by a factoring company, which then takes on the responsibility of collecting payments from customers. It is usually used for domestic and export receivables with credit periods under 180 days. Forfaiting specifically refers to the forfeiting of rights to future export receivables in exchange for an upfront discounted payment. It is used for longer term export receivables over 180 days and provides financing without recourse for the exporter. The key differences between the two are the parties involved, eligible receivables and credit periods, and level of services provided.
Trade finance instruments
The document describes several trade finance instruments: cash in advance, letters of credit, documentary collections, bank guarantees, bills of exchange. It provides details on each: cash in advance avoids credit risk but is least attractive to buyers; letters of credit provide secure payment if terms are met; documentary collections use banks to collect payment in exchange for documents; bank guarantees ensure debt payments if the debtor fails; bills of exchange are written orders to pay a fixed sum at a future date. It also compares letters of credit to bank guarantees, noting letters of credit transfer funds after conditions are met while bank guarantees only pay if the opposing party does not meet obligations.
a letter of credit is a payment mechanism whereas a bill of exchange is a pay...
This document defines a bill of exchange, outlines the key parties involved, and describes the essential components. A bill of exchange is a non-interest bearing written order used in foreign trade that binds one party to pay a fixed amount to another at a future date. It must be in writing, signed, contain an unconditional order for a fixed sum, and specify certain parties such as the drawer, drawee, payee, and acceptor. A bill of exchange provides a means for international trade by allowing creditors and debtors to transfer money for goods between countries.
Buyers Credit Means
If you are planning to construct a new or existing building or infrastructure and you have a lack of funds. You can opt the option of the credit facility then infrastructure loan is for you. It will help you to get it done right here from mapping process to implementation of project with ease way to opt for loan.
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The document provides information about banking and foreign trade. It discusses key topics like export process, import process, export finance including pre-shipment and post-shipment finance, methods of payment in international trade, documents used in foreign trade like commercial invoice, bill of lading, letter of credit. It explains letter of credit process and types of letters of credit. The document serves as a guide for understanding international trade terminology, procedures, documentation and financing through banks.
Buyers Credit Means
If you are planning to construct a new or existing building or infrastructure and you have a lack of funds. You can opt the option of the credit facility then infrastructure loan is for you. It will help you to get it done right here from mapping process to implementation of project with ease way to opt for loan.
Trade finance 01082914
This document discusses various terms and concepts related to trade finance. It begins by defining key trade finance instruments like letters of credit, and explains the roles of parties involved like applicant, issuing bank, beneficiary, etc. It then discusses types of payments and credits in international trade like open account, documents against payment, and confirmed letters of credit. The rest of the document covers topics like pre-shipment and post-shipment finance, types of credits, documents used, risks involved, and regulatory requirements for trade finance. Diagrams are provided to illustrate the process and flow of letters of credit and back-to-back credits.
LC.pdf
A letter of credit is a document issued by a bank guaranteeing payment to a seller when they provide stipulated documents to the issuing bank. There are two main types - irrevocable letters of credit cannot be amended or cancelled without consent, while revocable letters can be cancelled at any time. The letter of credit transaction involves an applicant (buyer), beneficiary (seller), issuing bank, advising bank, and sometimes a confirming bank. It guarantees payment to the seller when they provide the required documents such as a commercial invoice, bill of lading, and certificate of origin to the advising or confirming bank.
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a letter of credit is a payment mechanism whereas a bill of exchange is a pay...
a letter of credit is a payment mechanism whereas a bill of exchange is a pay...
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Trade finance venu reddy
- 2. CONTENTS Description Products and Services Method of payment
- 3. Description • While a seller (or exporter) can require the purchaser (an importer) to prepay for goods shipped, the purchaser (importer) may wish to reduce risk by requiring the seller to document the goods that have been shipped.
- 4. Products and Services Letter of credit • It is an undertaking/promise given by a Bank/Financial Institute on behalf of the Buyer/Importer to the Seller/Exporter. • If the Seller/Exporter presents the complying documents to the Buyer's designated Bank/Financial Institute as specified by the Buyer/Importer in the Purchase Agreement then the Buyer's Bank/Financial Institute will make payment to the Seller/Exporter. • the importer's bank may provide a letter of credit to the exporter (or the exporter's bank) providing for payment upon presentation of certain documents, such as a bill of lading. • The exporter's bank may make a loan (by advancing funds) to the exporter on the basis of the export contract. • A bill of lading is a document issued by a carrier to acknowledge receipt of cargo for shipment. In British English, the term relates to ship transport only, and in American English, to any type of transportation of goods.
- 5. Bank guarantee • It is an undertaking/promise given by a Bank on behalf of the Applicant and in favour of the Beneficiary. • Where as The Bank has agreed and undertakes that, if the Applicant failed to fulfill his obligations either Financial or Performance as per the Agreement made between the Applicant and the Beneficiary. • Then the Guarantor Bank on behalf of the Applicant will make payment of the guarantee amount to the Beneficiary upon receipt of a demand or claim from the Beneficiary.
- 6. • Bank guarantee has various types Tender Bond Advance Payment Performance Bond Financial Retention Labour Export • The term export means sending of goods or services produced in one country to another country. • The seller of such goods and services is referred to as an exporter; the foreign buyer is referred to as an importer.
- 7. Import • An import is a good brought into a jurisdiction, especially across a national border, from an external source. • The party bringing in the good is called an importer. An import in the receiving country is an export from the sending country. • Importation and exportation are the defining financial transactions of international trade. • Collection and discounting of bills: It is a major trade service offered by the Banks. • The Seller's Bank collects the payment proceeds on behalf of the Seller, from the Buyer or Buyer's Bank, for the goods sold by the Seller to the Buyer as per the agreement made between the Seller and the Buyer.
- 9. Method of payment • Popular methods of payment used in international trade include: • cash with order(CWO)-the buyers pay cash when he places an order. • cash on delivery(COD)-the buyer pays cash when the goods are delivered. • documentary credit(L/C)-A Letter of credit (L/C) is used; gives the seller two guarantees that the payment will be made by the buyer:one guarantee from the buyer's bank and another from the seller's bank. • bills for collection(B/E or D/C) -Here a Bill of Exchange (B/E)is used; or documentary collection (D/C) is a transaction whereby the exporter entrusts the collection of the payment for a sale to its bank (remitting bank), which sends the documents that its buyer needs to the importer’s bank (collecting bank), with instructions to release the documents to the buyer for payment. • open account: This method can be used by business partners who trust each other, the two partners need to have their accounts with the banks that are correspondent banks. • Methods of payment: Cash in Advance (Prepayment) Documentary Collections Letters of Credit Open Account Combining Methods of Payment Summary Resources Activities Assessment