Banks are ready to help international trading companies. The banks do this by financing various projects. If your business needs money to finance its international operations, banks and other financial institutions can walk you through the process. These institutions can provide pre-shipment finance, post-shipment finance, international trade financing service, supply finance, and import finance.
Pre-shipment finance occurs when the seller receives payment before the products are shipped internationally. This financing method allows companies to ship the products and complete the manufacturing process quickly. These funds are also used to meet a company’s short-term and long-term financial objectives. For example, shoe manufacturer’s receives pre-shipment finance from the bank. They use those funds to process, pack, and ship the shoes to an overseas vendor.
Post-shipment finance occurs when the seller has already shipped the product in another country and has not received the payment. An international trading company will fail it does not collect money in a timely manner. Banks can provide payments for uncollected funds. How does this help the international trading company? The trading company can use the bank payments to invest in new technology or to hire more employees. Also, the company does not have to wait 30, 60, or 90 days for a payment.
Import financing is a form of short-term financing. This type of financing is normally approved by banks so that a business owner can pay for imported goods. When you import goods from another country, it takes days, weeks, or perhaps months to resell the product. Import financing pays for those products until the owner sells those products. For instance, a German computer company buys 500 laptop computers from China. The German company can use import financing to pay for the 500 computers.
Supplier financing programs are used by international buyers and sellers. This platform brings international buyers and sellers together in a network. Buyers are able to negotiate payment terms and conditions. They can also get lower financing on products they need. Sellers or suppliers can get early payment options for the goods that they sell. This increases the supplier’s cash flow and improves the company’s financial position. The supplier finance programs also decrease outstanding sales.
Finally, businesses that trade internationally should consider using pre-shipment, post-shipment, import, and supply finance programs. The programs will vary because financial institutions use different methods to approve these loans. More importantly, make sure you understand the terms and conditions of the contract before you sign the dotted line