Trade Finance
What is Trade Finance?
Trade Financing is used when two parties need to bridge a gap in the trade purchase cycle, and helps settle needs of both buyers and sellers or, more commonly, exporters and importers. Trade finance is typically provided by banks or specialist finance organisations.
The Problem
Broken down, an exporter needs an importer to prepay for goods shipped to mitigate the risk factor in a deal or arrangement. Typically, an importer needs the exporter to document that goods have been shipped in order to reduce risk – the issue is that there needs to be an intermediary to ensure the deal goes as smoothly as possible, eliminating the risks that both importers and exporters are exposed to.
How we can help
As a third party, Simple Secure Finance can be that intermediary that both parties need. The bank or finance organisation will provide a letter of credit on behalf of the importer for the exporter, or the exporter’s bank, matching the documentation confirming the shipment of goods. This allows the exporter’s bank to then make a loan to the exporter on the basis of a contract or sale or exportation. The type of document used depends on the type of transaction and how evidence is shown i.e. a bill of lading to confirm shipment. Throughout the entire process, banks will not deal with the goods or services, only the relevant documentation.