Import finance is utilized in every international trade to cut risks and reduce nonpayment risks.
Trading globally means you have to be rich in capital, you have to be a skilled negotiator to form open account terms, But it doesn’t work that way.
Open account is unusual in international trade due to the high risk entailed in terms of nonpayment. Unfortunately, you will end up not paying your supplier on time due to several reasons. So, in this case, every seller will expect the advance payment or demand for the import finance instruments like,
- Letter of credit (At Sight or Usance)
- Standby letter of credit
- Bank guarantee
- Purchase order finance
- At Sight letter of credit benefits the supplier most, then the buyer. the seller gets paid once the buyer receives the shipment documents. This mode of transaction is equivalent to advance payment but just involving banks to cut the fraud and risks.
- Usance or Deferred letter of credit, on the other hand, gives the buyer more time to pay the invoice upon maturity. For example, if you negotiate with your seller for 60 days credit terms, then your bank will release the shipping documents upon the seller’s acceptance. It gives the buyer extra time for the payment or you can sell the goods and pay the due.
- This means payment is guaranteed to the seller in case the buyer fails to pay, which means the seller can relax when SBLC terms are established. Usually both the buyers and sellers frequently dealing with the transaction open the standby LC to monitor the dues.
- Guarantee and Bonds used in the government or project tenders for bidding purposes. In case, the buyer or applicant fails to perform or breach the contract then the beneficiary (obligee) can arbitrate and look for the settlement. Frequent importers and exporters usually go with the guarantees which are issued by the bank. Bonds and guarantees are most commonly used in construction, infrastructure, by engineering, or service-oriented companies.
Purchase order finance
- Purchase order finance, also known as ‘PO Finance’, provides funding for the buyers with purchase orders. The seller gets funds upon the acceptance of the PO. This finance has its pros and cons. The buyer has to be creditworthy and must have a good margin to engage in this type of finance. So mostly “PO financiers” work with finished goods products to reduce the risk.
How to obtain import finance from ITF?
We offer bonds, bank guarantees, standby letter of credit, both at sight and usance letter of credit. Simple fill out the form by requesting us the application form.
What are the requirements?
Our due diligence is very minimal and we provide without collateral basis, which means it’s unsecured import finance facilities. Just provide your incorporation details, shareholder pattern, business owner KYC, national ID, or Passport for verification. In rare cases, we ask for IT returns.
a. No collateral.
b. Hassle-free drafting and amendment.
c. Trade globally without restriction.
d. No interest rates, only onetime issuance fee.