International
Trade Finance Solutions
International trade finance solutions cater to overseas transactions for both import and export.
Import Financing
Import financing refers to the financial solutions available to businesses for funding the purchase of goods internationally. There are various structures available for import financing i.e. Suppliers Credit, SBLC backed Buyers Credit and many more.
Suppliers Credit
Supplier’s credit is a facility that provides funding to importers for their imports. This credit is extended based on an LC issued by the importer’s bank. The process involves the following steps. The process involves the following steps 1:
SBLC Backed Buyer’s Credit
As per the Reserve Bank of India (RBI), an SBLC-backed Buyer’s Credit involves the use of a Standby Letter of Credit (SBLC) to secure a short-term credit from foreign lenders for the import of goods into India. SBLC-backed Buyer’s Credit Works as follows:
Export Financing
Export financing refers to the funding of international trade by providing liquidity to exporters. It helps bridge the gap between the exporter’s need for immediate cash after shipment and the importer’s desire to deferred the payment until receipt of the goods or for some additional credit period.
Discounting / Confirmation of
Export LC
Following are the structures available for exporter:
The Discounting of Export Letter of Credit (LC) allows exporters to receive payment early by selling the credit-compliant documents to a bank at a discounted rate. This helps to avoid waiting for the LC’s due date, especially if it has a long tenor. The bank pays the exporter the present value of the LC, calculated by deducting interest from the LC’s face value, based on factors such as risks, tenor, and market rates.
By discounting the LC, the exporter gets immediate funds and improved cash flow. The bank waits until the due date of the LC to receive full payment from the issuing bank. This practice is common in international trade and helps exporters manage cash flow effectively. The bank assumes the risk of non-payment by the issuing bank, so the creditworthiness of the issuing bank and its country’s stability are crucial.
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