Saturday, June 7, 2014

The Advantages Of Trade Finance

By Sally Delacruz

There are already lots of methods used in the business industry. Trade finance is one of them that helps importers and exporters to finance their business. It is just a simple method but a has a greater means for all international trades. For most offshore businesses, this is their chance to benefit from this financial support.

Dubai is the most populous city and emirate in the United Arab Emirates. It is the second largest emirate by territorial size after the capital of Abu Dhabi. Actually, trading offshore has numerous risks. When a certain importer pays the upfront fee, but the exporter will only pocket the money without shipping the products. However, there is also a chance that the exporter provides a credit to an importer, but refuse to pay that makes the shipment for a certain delay. This is the situation where finance support comes in.

Most financial institutions offer letter of credits to the exporter by the importer through any banks in the country. This letter is a guaranteed payment for the exporter by a bank that issues the letter upon a receipt of proof that the commodities are already shipped. For those companies that are not utilizing this kind of facilities is a mistake for small businesses that could sometimes affect the cash flow.

This is sometimes a confusion for companies in the industry. This is essential for companies that are into exporting and importing business. It is best for a good return of profit for all offshore businesses. Sometimes, there is a hesitation because it may affect the overall cash flow of the company.

In this situation, it is better to talk with the bank manager if what are the benefits of these facilities. For most importers, these facilities is a helpful way to support the cash flow of the sale goods and the purchase products. For exporters, this is a solution for any pre shipment financing support in the manufacturing procedure for a proper management of cash flow before paying the commodities that are sold overseas.

It is essential to minimize the trading, currency and administrative risks in the international trade industry. It is a better solution for a proper importation of documents and letter of credits. It has the capacity to reduce the turnover without the threat of cash flow. This is highly available to the importer and exporter companies for their shipment procedures.

It is sometimes complicated for others, but the truth is, it just simple. There are some structures that looks complex, especially in the financing, but it is still best to require a good deal for both parties involved in the entire process. This is why, the amount of loan is high to authorize a higher paid adviser, lawyer and banker.

Since it is simple and flexible to utilize, there is always a clear overview when it comes to business transactions. It can monitor each individual transaction from the beginning to the end. The data can also be transferred easily to spreadsheets and the system can be used again that saves more time and minimize the risk of an error.

It has the advantage for an early settlement of discounts from the suppliers. It can also consolidate orders by obtaining a good shipping rates and to improve the prices for the bulk orders. It can avoid the needs in changing a commercial banking relationship in obtaining high facilities.

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