What Are the Different Methods of Financing International Trade?

Trade finance is one of the banks' businesses. Refers to short-term financing or credit facilities related to the settlement of import and export trades provided by banks to importers or exporters. Overseas trade financing business refers to the financing method used to extend the payment period under the letter of credit by using the financing quota and financing conditions provided by foreign correspondent banks when handling import issuance.

Trade finance

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China Status

Since China's entry into the WTO, the number and scope of China's foreign trade have expanded rapidly. The main body of foreign trade will expand to multiple levels. International trade

Companies at various stages of their business activities have long known the cost of holding inventory costs, and many companies have undertaken practical activities to streamline the value chain and keep inventory lists to a minimum. Currently, they are trying to apply a similar thinking model to their financial management, and as a result, banks are taking a new look at the trade financing services they provide to corporate users.

When these services were recognized, the cash flow statement incorporated many different measures and financial products. This is actually very similar to just-in-time inventory management. Technological improvements, such as the Internet, have made the world a more trusted place. Traditional trade finance transactions involving letters of credit are too time consuming and slow-costing customers a lot of money.

But the world is also becoming more complex. For example, trade. If you have one or more suppliers operating a supplier-managed inventory system, how do you handle payments for these goods as the quantity of supplies is considered too small? If you outsource most of your value chain to an offshore company, when are payments due? Companies are looking for ways to reduce the financing costs of their businesses, and some intend to go to the bank and say, "Give me an electronic system, and you can own all of my trading business."

Banks are selling technical solutions that claim to be cash flow statement systems, but few of them can actually deliver on their promises. They already have many components, but they still usually require a lot of consulting services to make them work. What these banks need is a highly integrated system that provides the necessary support to provide cash flow statements through the links between buyers and sellers.

Raising awareness on the development of international trade finance business

With China's further opening up, international trade has become increasingly frequent.

1. The business scope is gradually expanding, and the product is constantly enriching

From import and export billing and discounting services brought by traditional international settlement products such as letters of credit, collections, remittances, etc., to services covering all links in the entire industrial chain of customer procurement, production, and sales; Expand to prevent various risks, beautify financial statements, insurance, warehousing, customs declaration and financial advisory consulting services; from international trade financing services to domestic trade financing services.

2. Transfer of document business to credit sales

With the formation of the buyer's market, OPEN ACCOUNT has gradually become the most important trading method. According to statistics, about 70% of China's international trade is settled on credit, while in domestic trade, the proportion of credit sales is higher. Based on this, traditional documentary services such as letters of credit and collections continued to decline, while remittance services based on credit sales rose rapidly. The trade financing business revolving around credit sales settlement methods has risen rapidly.

3. Standardization of a single product to a structured product

With the diversification of customer needs, standardized single products are difficult to meet the full range of customer needs. The trade financing service must design tailor-made structured (STRUCTURED) product solutions for customers based on the characteristics of their needs.

1. Low barriers to entry for trade financing, which effectively solves the problem of SMEs being unable to raise funds due to financial indicators that fail to meet bank standards.

2. The trade finance approval process is relatively simple, and enterprises can obtain the required funds relatively quickly.

3. Trade financing has lower risks than general loans and can effectively reduce bank risks.

4. Trade financing business can expand the source of bank income and adjust the income structure.