STRUCTURE TRADE FINANCE

Structured Trade Financing: Characteristics, Functions, Instruments

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Table of Contents

Introduction3

Characteristics of Structured Trade Finance5

Functions of Structured Trade Finance7

Export Receivables-Backed Financing7

Inventory/Warehouse Receipt Financing9

Pre-Payment Financing10

Instruments of Structured Trade Finance12

Documentary Credit12

Countertrade13

Factoring13

Pre-Shipping Financing14

Post-Shipping Financing14

Buyer's Credit15

Supplier's Credit15

Conclusion15

References17

Structured Trade Financing: Characteristics, Functions, Instruments

Introduction

Trade Finance is the method importers and exporters of items and items use to cash their business. Generally, market cash has been on the market for many thousands of years - and one can find the main platform of market cash and organized market cash right back to the beginning of the far eastern and the natural cotton direction, Mesopotamia and Europe. Trade Finance was around comprehensive before Folks accomplished in the United States and comprehensive before the planet's stock marketplaces were born.

Today, Trade Finance is a large, multi-billion dollars business. As the world purchases more and more items and items are treated, so more and more banking organizations and lenders are needed to offer cash to finance the purchase of these items- right across the worldwide supply never-ending cycle.

For example: think about you are a trader in cocoa beans in Cote d'Ivoire, purchasing cocoa beans in the area and selling them to offshore customers. To make your purchases, you will need to have money to buy the cocoa beans up-country in African-American, before their switch. Where will you find money to make these purchases? And say you are the around the world buyer; the shipper, purchasing from cocoa beans traders all over Traditional European African-American - how will you money your purchases, which at any one time may go over your money reserves? What might be tough by your lender who, if they are traditional providers, will only provide against your balance sheet?

This is where Trade Finance and Structured Trade Finance is useful - your business can create and make if you use the solutions of an experienced Trade Finance workplace who will Structure Trade Finance elements can be customized to your needs, using the assurance of the products you are dealing, rather than your own balance item or other options.

Goods and commodities have an invisible value of their own. For example, if cocoa beans are value many a lot of dollars per tonne, then once a big pile of cocoa beans is accumulated in one place; in a manufacturer or on a deliver, it is value a lot of money. A financial institution may offer money against the complete value of the cocoa beans, without some amount to take account of price and other risks.

It is the same for every financial commitment or trade good which is resalable. A financial institution will make a mortgage providing the assurance “adds up” and providing the lending company is comfortable with the way the deal is organized between both the consumer and the company. Of key relevance is that if something goes wrong the lending company is able to take possession of the products or products and offer them to recognize money to pay back any loans excellent.

Basically, when we talk ...