Advantages of Opting for Trade Finance Services

February 27, 2020

There are a competitive number of trade finance service providers in Dubai with the ability to guarantee smooth foreign and domestic border transactions. Transactions that will meet your business goals and facilitate economic growth in the country.

Some of the banks that offer this trade finance services like Capital provide; credible documents as regards import and export financing, several types of bank guarantees and letters of credits, cash financing for import and export and lots more.  All of this is done in order to reduce the risk of the business and help companies grow their trade frontier. There is a lot more to trade financing. Here are the major things you should know about it.

Eliminates Payment Risk

The emergence of trade finance services has really helped to curtail the risk involved in international trade. Most buyers weren't ready to pay for their goods until it got to them in perfect condition, this was a source of worry to exporters who weren't sure they would get paid. But with trade financing, the buyer's bank now provides the exporter with a BG OR LC as a form of payment.

Facilitates Economic Growth

Trade finance reduces tension and distrust between importer and exporter thereby leading to significant growth and development across the world. There is clarity and understanding as the exporter no longer has to wait before he gets his payment and the buyer is sure all his supplies have been sent.

Form of Trade Financing

To facilitate your trade transaction your bank will offer you different products or instruments, depending on your company or transaction.

Letter of Credit

This is a customized guarantee taken by the buyer’s bank to the seller stating that all payment will be made to the seller once a shipping document that contains the purchase agreement is provided.

Bank Guarantee

This is a situation whereby a buyer or seller fails to meet up with the transaction agreement. The bank steps in acting as a guarantor and pays the amount due as earlier agreed.

These two definitions may vary depending on the type of transaction involved.

Trade Financiers

Banks are also known as trade financiers. The seller sometimes in a bid to get his money quickly sells his invoice to a trade financier at a subsidized rate. This gives the exporter capital to continue trading. However, the trade financier makes a profit from this when the buyer has made payment.