Understanding Trade Finance
Have you ever wonder how the supply chain works? or else how project contractors execute their construction or building a new bridges!
Even if companies work together for more than a decade still they don’t rely on payment terms. In this stage, trade finance term knocks the door and helps the seller or beneficiary to take a breath. Any seller needs proof of payment from their buyers, vice versa seller also needs to pay their vendors. So personal touch between the buyer and seller is very important, but payment terms are far more important than personal connection, So the whole world works under trade finance terms to supply the goods or services without hassle.
Method of supply chain arrangement
Buyer and Seller agree to sign a contract, Assume the seller is from China and the buyer is from Canada, Every small or large enterprises has cash flow concerns so the buyers ask for a credit period of minimum 30days or upto 6 months to pay the seller. Initially, a buyer asks for open account terms to cut down certain costs but the seller denies eventually due to cross border threat, So they both agree to handle payment terms as per Letter of Credit, Bank Guarantee or Standby Letter of Credit terms. These days SWIFT is the common messaging tool used by all financial institutions to create, amend or follow the terms and conditions and it is regulated by the International chamber of commerce, Uniform custom practice and other regulatory governed authority to control the cross border menace.
How to get a trade finance line of credit?
To attain a trade finance line from the banks, a buyer must submit the collateral or deposit the cash or equivalent to the bank to fund their trade finance requirements. Even after submitting the collateral or cash deposit to the bank, the bank charges interest rates to open an LC or a BG.
Consider now the trade finance line limit is open for a particular supply but what about the other or next purchase? Do the buyers have to arrange another collateral or cash to attach an asset to fund his purchase? Most of them are not in this position. Plus banks don’t approve an unsecured line of credit when purchase value is higher than collateral or transaction limits.
Where ITF Stands?
So, In this scenario, we at ITF, have our own banking line limits and partnership with global institutions to fund your trade finance requirements. The cool part is we do not ask for any collateral nor cash deposit to open an LC or a BG. ITF has own SWIFT based messaging service, buyers or contractors can utilize our line limit to fund their trade transactions. We do not work under interest rates, Our fees to open an LC or BG are reasonable.
We are not the bridge between buyers and the banks. We are the destination to get all sorts of trade finance products directly.