Guide for Export Finance

Export finance

The Guide for Export Finance has been developed for the traders to facilitate them with the required information regarding international trade.  It enlists number of financial measures in order to promote exports. You would come to know about the various modes of payment within global trading along with a number of products and services which are available for you within trade finance especially for exporting. It also represents various shipping documents and finance related legal documentation. 

What is export finance?

Export Finance can be described as a specialist range of finance which specifically focuses on the export market. The main aim of export financing is to support businesses to reach and expand within the international market along with the crucial aim to maintain positive cash-flow cycle when the goods are in transit. 

Methods of payment

Typically, there are three standard ways for making payments within the export import trade in the international trade market:

1.   Clean Payment

2.   Collection of Bills

3.   Letters of Credit (L/c)

1. Clean Payments

When you choose clean payment as a mode of payment all shipping documents are supposed to be submitted directly between the trading partners and their role of banks gets limited just to clear amounts as per the requirement. required. Such method provides traders with a relatively cheap as well as uncomplicated method of payment. 

There are basically two types of clean payments:

●      Advance Payment

●      Open Account

2. Payment Collection of Bills in International Trade

This method of payment of international trade requires the exporter to entrust the bank for handling all necessary commercial as well as financial documents and provide banks the necessary instructions which concerns about the final release of all these documents towards the importer. It is seen as one of the most cost-effective methods to keep the transactions evident for buyers, where trade documents are manipulated by the associated banking system.

There are generally two methods which are opted within collections of bills:

●      Documents Against Payment D/P

●      Documents Against Acceptance D/A

3. Letter of Credit L/c

An LC is a financial document which is provided by a third party i.e. a bank or a financial institution that guarantees the payment for goods and services to the exporter once the exporter submits the required documents. A letter of credit has three important elements – the beneficiary i.e. seller who is the recipient of the LC, the applicant i.e. buyer who buys the goods and services and the issuing bank that issues the LC on the buyer’s request.

Various types of L/Cs are:

●      Revocable & Irrevocable Letter of Credit (L/c)

●      Sight & Time Letter of Credit

●      Confirmed Letter of Credit (L/c)

●      Export finance and documents

International market for trading involves various types of trade documents which has to be produced while making a number of trade transactions.

Below mentioned documents are often used in international trade:

●        Air Waybill

●        Bill of Lading

●        Certificate of Origin

●        Combined Transport Document

●        Draft (or Bill of Exchange)

●        Insurance Policy (or Certificate)

●        Packing List/Specification

●        Inspection Certificate