4 Trade Finance Tools to Consider When Engaging in International Trade

Trade Finance Tools for International Trade
Businesses engaging in international trade are well-acquainted with the added financial risks of importing or exporting goods and services from other countries.

From the increased pressure of the global supply chain to fluctuating currencies to the difficulty of figuring out the creditworthiness of a foreign partner – the trade industry involves a lot of risks. Good thing trade finance offers several ways to mitigate these risks.

Here are four of the most common forms of trade finance tools to choose from if you want to engage in international trade and manage your business risks accordingly.

1. Letter of Credit

A letter of credit can serve importers and exporters in various ways. This is a guarantee of payment by the bank of the importer to the exporter. The guarantee depends on the exporter meeting all the terms and conditions mentioned in the letter of credit.

Oftentimes, the conditions will require the exporter to provide some documents like a bill of lading. This document serves as a proof that the right products were delivered, or that the correct services were performed.

A letter of credit is an invaluable tool if you export goods and services to foreign customers, especially in determining the creditworthiness of such clients, and their ability to pay you on time.

Due to the fact that a letter of credit is provided by a financial institution that is local to the importer, such a bank is in a better position to figure out if the importer is creditworthy. Typically, there is no question about the bank’s ability to pay.

It is a good idea for you to require an importer to get the right type of letter of credit each time you are working with new trade partners. This can be obtained for ongoing trade deals or for single transactions.

2. Accounts Receivable Factoring

Accounts receivable factoring is among the most common trade finance options your business can use. This is otherwise known as invoice factoring and debt factoring. This is a short-term asset-based financing available to B2G and B2B businesses.

Accounts receivable factoring involves selling an invoice that will be due at a later time (usually in 30, 60 or 90 days) to a factoring company that pays you a certain percentage of that invoice in advance. If the customer pays the invoice, the remaining balance of the invoice less the factor rate will be given to you by the factoring company.
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Invoice factoring is an excellent form of trade finance since it will solve two common problems experienced by exporters – competitiveness and cash flow. It allows you to give more generous credit terms to your customers since you can turn an invoice into cash immediately. Also, it helps you pay for the costs related to producing and delivering your services or products. You don’t have to wait for months for your clients to pay the bill.

3. Forfaiting

Forfaiting is a trade finance form that is quite the same with invoice factoring. It allows your exporting business to sell your account receivables at a discount in exchange for cash. The only difference is that forfaiting is a non-recourse financing option for medium-term receivables instead of short-term receivables.

Forfaiting reduces the risk of non-payment by foreign customers whilst giving you a solution to near-term cash flow concerns. It turns a credit-based transaction into a cash deal. Aside from guaranteeing your customer’s creditworthiness, forfaiting also pays a medium or long-term contract instantly, thereby improving your cash flow.

4. Open Account

Open account is a convenient payment method in an international transaction, allowing you to get the most of import and export finance without the need for a documentary credit.

This arrangement can be satisfactory when the buyer is creditworthy, well-established or has demonstrated an excellent payment record. It allows you to bill your customer who will pay the agreed terms on a specific date. But before issuing a pro forma invoice to the buyer, you need to examine the political, commercial, and economic risks involved.

If you want to engage in international trade, it is crucial for you to familiarize yourself with the different trade finance solutions you can use.

From accounts receivables factoring to letters of credit and forfaiting to open account terms, there are a lot of tools available for businesses dealing with foreign customers. These trade finance options will help ensure that you get the full payment of your products and services on time. They also balance out the risks and make cash more readily available.


The future of car insurance online in 2018

car insurance online 2018
After buying a car, it is mandatory to insure it. However, it is absolutely not mandatory to buy the policy from the insurance provider your dealer is suggesting. There are many car insurance companies in the market with attractive schemes and lucrative discounts on their premiums, and it is always a wise idea to compare the rates and the plans of different insurance providers so that you can choose the best option. The key criteria here is to get high coverage with low premium rates.

This is where buying a car insurance online comes into the picture. In the online process, the comparison and selection can be done with the help of a few clicks only. However, there is still a wide chunk of car buyers who blindly buy insurance on the basis of dealer’s suggestion and end up buying a not-so-good plan.

This trend, however, is expected to see a change in In 2018. The car insurance companies are planning to spread awareness regarding the benefits of buying a car insurance online. Plus, to promote online buying, the insurance providers are expected to offer more discounts in the premium to the new car buyers as well as the renewal of old policies.
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Components of car/ vehicle insurance coverage:

The insurers offer various types of coverage in case the car faces an accident. While insuring a car, it is mandatory for the car owners to pay a certain amount of liability coverage premium. During an accident, liability coverage may help the owner pay money for the treatment of the injured person. If the car owner mistakenly causes damage to some other’s property, the liability coverage comes as a rescue here as well.

Furthermore, it is legally mandatory for the car owners to have insurance coverage for their respective cars. Similarly, there are other insurance coverages for collision, damage due to natural calamities, theft, damage due to man-made disasters,treatment and medical assistance coverage etc.

Advantages of buying car insurance online

Car insurance is always beneficial against theft or damage, but finding out the best deals and comparing it is basically a very tiring job. So the best method is to compare them online. It’s a hassle-free process. Comparing and choosing the best provider is easy and can be done with a few clicks.

future of car insurance

What is the future of car insurance online in 2018?

In today’s lifestyle technology plays a pivotal role and new generation cars are very sophisticated and have numerous updated features. For that reason only, customers look for lucrative offers. Expectations have accelerated a lot in today’s scenario. With the ever-changing requirements; the customers expect better profits and lower expenses.

Accidents are not desirable but many of us face this unpredictable situation, and that is why insurance is necessary.

Since 2017, the insurance rate and the renewal rates are falling subsequently. This is happening because of huge competition among the car insurance companies and also for the elevation of online buying. Expect this trend to grow further in 2018. Just make sure to compare all the available car insurance plans online in order to fetch the best deal.