What is a structured business finance?

Structured business finances is a primary means that many world commodity exporters finance their operations. Global business is fed mainly by commodity trade. Some of the most valuable assets are oil and precious metals, but important players are also lumber, textiles and agricultural products such as coffee and cocoa. However, international trade is expensive, although it has a significant profit. Traders from all socio -economic background often require financing at the beginning, which usually come in the form of complex collateral and contractual agreements, which took place under the umbrella of a structured trade.

Banks and banking institutions are the main creditors of structured transactions for trade financing. In some respects, these transactions are similar to loans that traders usually get money ahead, but are set very differently. Rather than a maturity date for repayment, banks set up ongoing repayment plans where invested and foreign credit payments cyclingThey take money back to structured business tools when the trade is completed and ripened.

There are usually two main structured formats of trade financing. The first format focuses on working capital warranty, which is basically cash payment in advance for the value of the commodities to be traded. This kind of plan is popular for business traders in developing countries or countries that do not have a stable loan. For this type of exporter, it may be difficult to strengthen sufficient support to pay fees so often involved in exports on the front: to accumulate the commodity, processing and securing its shipment to name at least some. The costs associated with the conclusion of contracts and negotiations with the importer are usually also taken into account.

The second type of structured financing of trade focuses on receivables that are used by foreign contracts. In these cases notThe value of the actual goods, but rather the value of the agreement on import/export, evaluated. The use of the contractual instrument allows traders to maintain control of their goods and the structure of the accompanying prices and at the same time to mitigate the risks with foreign creditors. Most of the time, this kind of plan is closed by importers and exporters who are perceived as a more reliable credit for a similar financial position or where the exporter's credit is perceived.

Individuals and corporations dealing with international trade often conclude agreements on structured business finances with banks, even if they have sufficient capital. The involvement of the bank and having a third party assess and structure the financial aspects of the trade agreement limits the financial risk and in many ways is securitization measures. Imports and exports are often perceived as guaranteed if they are supported by a structured plan. Financing a comprehensive transaction helps protect the financial assets of the merchant that can help control market prices and can help maintain the tendencyADY for consumers consistent.