EXPORT FINANCING - INTERNATIONAL TRADE FINANCE
Export Financing - What is It?
This page is about export financing and it is designed to introduce you to a well known financial facility that helps meet the ever increasing international trade finance demands of international traders by freeing-up their funds involved in international trade transactions.
Export financing provides exporters who have orders from customers abroad with the necessary financial backing to provide their overseas customers with the most favorable and competitive international trade finance credit terms.
Borrowers have a variety of international trade finance funding options through the wide range of funding programs offered that can provide them with the flexibility they need to increase their profits and decrease transaction costs.
What Are The Advantages Of International Trade Finance?
What Size Transactions Can Be Financed And How Are They Handled?
Any size of transaction, small or large, can
qualify for international trade finance funding.
The exporter will apply for a USDA guarantee for a particular sale.
Costs usually involve an application fee and a monthly rate for the outstanding duration of the loan.
Companies seeking to grow market share by exporting their goods into international markets, but that are unwilling to assume the economic and/or political risks of non-payment.
The typical user may not wish to grant open credit to its foreign buyers or, if it does, may not qualify for traditional
international trade finance funding of its foreign accounts receivable.
The most popular programs involve either: (1) loan terms of up to 180 days, covering 65% of the risk of importer default and requiring only a promissory note from the importer; or, (2) loan terms of up to 10 years, covering 98% of the risk of importer default and requiring a foreign bank letter of credit from the importer.
How to Get Immediate Export Financing for Export Credit Sales
For the last 20 years, the USDA has provided US exporters with international trade finance guarantees for their export credit sales to help domestic companies compete with foreign suppliers and allow them to increase sales into countries where it might not be possible without the added security of the guarantees.
While the original programs offered long-term coverage and used foreign banks
letters of credit as security, changes in the international trade finance
market mandated a new type of guarantee based on shorter credit terms and cheaper payment mechanisms.
At the same time, the 35% risk maintained by the exporter allows the USDA to approve
guarantee applications quickly and without any importer underwriting as they entrust exporters to do all the necessary due diligence. However, many exporters, while desiring to
provide the most beneficial export credit terms to their buyers, still cannot afford the delay in payment for their sales for the entire duration of the credit term. Others simply want
additional liquidity more rapidly.
International Trade Finance - Export Financing
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