Trade Finance Services is so famous, but why?

While trading overseas there is a burden on a business cash flow along with delays and complications. One needs to keep a track of freight charges and tariffs to ensure there is no loss associated while trading overseas.

Trade financing or import financing service specializes in overcoming these challenges and also spares the working capital for investing in the growing businesses.

Trade finance Services helps to bridge the funding gap between a credit order and the payment to an overseas supplier. This eases the cash flow pressure. There are two types of credit facility to the importer – buyer’s credit and supplier’s credit.

Buyer’s credit finance means finance for payment of imports arranged by the importer from a bank or a financial institution outside the country. The finance is based on a guarantee given by the importer’s bank.

Supplier’s Credit has credit extended directly by the overseas supplier (exporter) to the buyer (importer) instead of a bank or a financial institution for imports. The supplier’s credit means credit extended to the buyer (importer) for imports directly by the overseas supplier (exporter).

After the reporting of Punjab National Bank fraudulent transactions of about $2 billion, the $85 billion of Indian buyer’s credit has come to a grinding halt.

Read more about Forex Risk Management Techniques?

Comments

Post a Comment

Popular posts from this blog

Foreign Exchange and Risk Management

Image
The term Foreign exchange implies two things; they are foreign currency and exchange rate. Foreign currency is any foreign nation’s currency which is authorized medium of circulation and the basis for record keeping in that country. An exchange rate is the value of a nation’s currency in terms of another currency. The strengthening of the globalization process has led to a rise in foreign exchange transactions in international financial markets. This has set on higher volatility of exchange rates and has absolutely increased foreign exchange risk. There are numerous types of risks involved, however only a few can bring losses as massive as foreign exchange risk. In these conditions, the demand for new modern and effective methods for managing foreign exchange risk becomes a great necessity for the parties in international foreign exchange activity. Foreign Exchange Risk Management is crucial for firms frequently trading in the international market. Coping with risk has therefo
Read more

Forex Risk Management Techniques

Image
The need for forex risk management arises when traders who have open positions are willing to cut the size of their potential losses but alternatively there are also another set of traders who are willing to gain massively from single open position. The main aim of trading is to enjoy higher returns but it comes with higher risk.  The case is similar for corporate which have expected cash flows inwards or outwards depending on being an exporter or importer. If these cash flows are left un-hedged, the case is equivalent to trading. It is at this point there is need to understand what proper risk management is. Forex Risk Management Techniques can make the difference between survival and sudden death of a trader in the currency market. Even when best trading systems are in place, but no risk management strategies are there, failure would knock on your door sooner than later. These strategies can come in the form of cutting down on your lot size, entering the market at par
Read more

What is Foreign Currency Exchange?

Image
Foreign currency exchange also abbreviating as Forex or FX is the conversion of currency of one country into another country’s currency.  In Foreign exchange markets, currencies are traded around the clock over the counter. Foreign exchange transactions are currencies exchanged by a traveler or by any corporate making payments to financial institutions and governments across the world. Transactions could be made by individuals, corporate or institutions. Importers and exporters or anyone taking speculative positions with no underlying goods or services all transact with currencies. The number of transactions has increased in the recent decades. Unlike equity and debt markets, the global Foreign Currency Exchange market is the largest and the most liquid financial market, having over trillions of dollars as average daily volumes. Foreign exchange transactions can be done for spot or forward delivery. They are executed over the counter (OTC) and around the clock and ther
Read more