The Role Of Trade Finance

By Sally Delacruz

The existence of many methods today makes everything in the trade industry to be easier. One of these methods is the trade finance wherein the exporters and importers of products are financing their business. It is quite simple and a great means for any international trade. If you have an offshore business, you have a greater chance to benefit from a finance support.

Today, Dubai has emerged as a cosmopolitan metropolis that has grown steadily to become a global city and a business and cultural hub of the middle East and the Persian Gulf region. It is also a major transport hub for passengers and cargo. Trading offshore is most common for businesses. However, certain risks are provided during the utilization. Once the importer already pays for the upfront payment, the possibility is when the exporter pockets the money without the shipment. Sometimes, exporters provide the payment, but the importer refuses to make the shipment.

Financial companies, are mostly offering letter of credits to each exporter made by an importer through banks. This is a credit letter that makes a sure payment for an exporter through a bank that provides the letter with proofs that the goods are already sent and shipped. For companies not utilizing this facility has made a great mistake that might affect the cash flow.

Sometimes, there are confusions of the right time to utilize a trade support. This is beneficial for all import and export companies in a country. It also provides a certain profit for every offshore business. Sometimes, it is because of the cash flow that gives a hesitation for a 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.

This is essential for reducing the administrative, currency and trading risks in the international trading. It is also a great support for an administration of the letter of credits importations. It has also the capabilities to increase the turnover without any threat in the cash flow. The facility is available for companies in the importing and exporting industry process.

It seems a complicated process for others, but it is not. It just a simple business, although the structure that is used in financing is complex, but the dealing still requires lots of work for each party involved. This is the reason why the entire amount of loan is high to warrant a high paid banker, adviser and lawyer.

It is also a simple business process and always provide an overview of each business transaction. It can give a monitor progress for an individual transaction from the start until the end. It can easily transfer a data to a spreadsheet and each system can be reused again to save time and reduces the risk of mistakes.

It has the benefit of a settlement for any discounts from a supplier. It can help for the consolidation of the orders that are obtained for a better shipping rate price for the improvement of bulk prices. It enables to avoid the need to change a commercial banking relationship if this facility is obtained.

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