Export and Import Finance is a finance method that fulfills the funding gap between receiving goods and sending payments for importers and exporters. Sellers look for immediate payments whereas buyers prefer to delay payments because access to working capital is biggest financial limitation for most export and import companies.
Advance payments terms are risk for the buyer since there is no guarantee that seller will send the product of good quality and on time. Likewise, selling on credit to the buyer is riskier for the seller because buyer might default on the payments.
Export and Import Financing offers a way to mitigate these financial risks. There are several reasons to use Export and import financing for the growth of their business.
1. It is much easier for negotiation of convenient terms of transaction when finance constraints are not a factor.
2. It prevents working capital cash flow problems for both exporters and importers.
3. It provides convenient repayment periods between 30 to 90 days for importers.
4. Obtain financing that is less expensive than local financing which may be subject to restrictions.
5. Exporters receive payment upon shipment of goods.
6. Exporters can avoids credit, currency and interest-rate risks in the settlement period.
Export and Import Finance Methods:
The business strategies can be aligned along the export and import financing techniques and work towards reducing the financing cost of export or import.
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