What is Import Finance?

 

Import finance provides cash advances or borrowing facility to importers for making payments for their purchase orders from exporters. It funds the gap between receiving the goods and making the payment. Importing and exporting are quite complex transactions and there's usually a long time between the purchase and the delivery of products, which might result in a considerable cash flow problem for SMEs since they need to function and cover their expenses while waiting for the products to arrive. Import finance facility helps ease the pressure on cash flow and gives time to the importer to arrange funds while tending to their working capital requirements.

Eligibility for import funding

To be eligible for import funding, following documents are generally required:

  1. Request Letter giving complete import details and along with Acceptance of negotiation charges.
  2. Offer Letter issues by Overseas Funding Bank. (If Required).
  3. Trade Credit Agreement (as per the prescribed format of Overseas Bank).
  4. DNB/Credit/KYC reports of buyer and supplier.

Types of import finance

Various types of import financing options:

  • Buyer's credit: Buyer's credit is a short-term loan facility arranged by an importer from an overseas bank to finance the import bill. Buyer's credit is backed by a security given by the importer's bank in the form of Stand by Letter of Credit or Usance Letter of Credit.  The NOSTRO of the importer's bank is credited by the overseas bank and the importer's bank uses the funds to make the payment to the exporter's bank on the due date. 
  • Supplier's Credit: Supplier's credit is a facility of arranging funds for importers using bank risk (keeping usance LC as an underlying asset). This credit facility is extended to importers for imports into India by overseas suppliers or Financial Institutions. The overseas bank or the suppliers/exporters provide this import funding to the importers at rates linked to Libor against the usance letter of credit. 
  • Reverse factoring: Reverse factoring is an import finance facility wherein the importer gives its payable invoices to a third-party funder, who then pays the exporters earlier than the importer could have. The exporter receives a discounted payment and the importer pays the funder the full amount
  • Prepayment finance: In prepayment finance the importer obtains a loan from its bank for fulfilling its payment obligations. The importer makes an advance payment to the exporter and after selling the goods, he repays the loan to the bank.

Why you should use Myforexeye's for calculating Import Finance?

 

Myforexeye is India's first technology-oriented platform that provides its users with cheap, instant, and most convenient buyer's and supplier's credit quotes. Myforexeye has made trade finance consulting services available through just a simple click or tap on the Myforexeye mobile application. We have trade finance specialists who make the process of availing import finance smooth and seamless for you. By pooling the transactions, we are able to negotiate better buyer’s credit and supplier's credit quotes. The cash credit vs import funding calculator gives you an instant and reliable comparison of funding methods. Myforexeye is a one stop source for all your trade finance consulting needs.

Cash Credit Vs Import Funding Calculator

Drawdown Date

Currency

Funding Tenor (in days)

Transaction Amount

Discounting Spread (in %)

SWIFT & Other Charges

Cash Credit (CC) Cost
(in %)

Cost Calculation

Libor Period

Libor (%)

Current Spot Rate

FC Forward Rate

Forward Premium (in %)

Total ROI (in %)

Total Buyer's Credit Cost (in FCY)

Total Buyer's Credit Cost (in INR)

Comparison

Fully Hedged Buyer's Credit
Cost (in FCY)

Unhedged Buyer's Credit
Cost (in FCY)

Cash Credit (CC)
Cost (in FCY)

in %
in %
in %

Net Interest Saving :

Hedged Cost: 0 %|0 Unhedged Cost: 0 %| 0

Funding Date

Currency

Funding Tenor (in days)

Transaction Amount

Discounting Spread
(in %)

Confirmation Charges
(in %)

Period of Confirmation
(in days)

SWIFT/Negotiation/Courier Cost

Cash Credit (CC) Cost
(in %)

Cost Calculation

Libor Period

Libor (%)

Current Spot Rate

FC Forward Rate

Forward Premium (in %)

Total ROI (in %)

Total Supplier's Credit Cost (in FCY)

Total Supplier's Credit Cost (in INR)

Comparison

Fully Hedged Supplier's Credit
Cost (in FCY)

Unhedged Supplier's Credit
Cost (in FCY)

Cash Credit (CC)
Cost (in FCY)

in %
in %
in %

Net Interest Saving :

Hedged Cost: 0 %|0 Unhedged Cost: 0 %| 0