Synopsis on Portfolio management

jainbhaveshdilip

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Gyaan Raja

MP Guru
hey can any 1 help me for Trade Finance synopsis

hey can any 1 help me for Trade Finance synopsis

Hello Freinds,

Welcome me to MP..this is my first post:SugarwareZ-157:

Found this topic interesting and have sme info on it...

What is trade finance?

In its simplest form, an exporter requires an importer to prepay for goods shipped. The importer naturally wants to reduce risk by asking the exporter to document that the goods have been shipped. The importer’s bank assists by providing a letter of credit to the exporter (or the exporter's bank) providing for payment upon presentation of certain documents, such as a bill of lading. The exporter's bank may make a loan to the exporter on the basis of the export contract.


Trade services and supply chain

Building on what is termed traditional trade finance, there are a number of ways in which banks can help corporate clients trade (both domestically and cross-border) for a fee.


A typical service offering from a bank will include:

Letters of credit (LC), import bills for collection, shipping guarantees, import financing, performance bonds, export LC advising, LC safekeeping, LC confirmation, LC checking and negotiation, pre-shipment export finance, export bills for collections, invoice financing, and all the relevant document preparation.


Despite this focus on the LC, over the years the term trade finance has been shifting away from this sometimes cumbersome method of conducting business. It is now estimated that over 80% of global trade is conducted on an open account basis.


Led by large corporates, this form of trade saves costs and time and so has been adopted by smaller corporates as they become more comfortable with their buyer and supplier relationships. Open account transactions can be described as ‘buy now, pay later’ and are more like regular payments for a continuing flow of goods rather than specific transactions. This is much cheaper for corporates.

Factoring & Forfaiting

Factoring, or invoice discounting, receivables factoring or debtor financing, is where a company buys a debt or invoice from another company. In this purchase, accounts receivable are discounted in order to allow the buyer to make a profit upon the settlement of the debt. Essentially factoring transfers the ownership of accounts to another party that then chases up the debt.

Forfaiting (note the spelling) is the purchase of an exporter's receivables – the amount importers owe the exporter – at a discount by paying cash. The purchaser of the receivables, or forfaiter, must now be paid by the importer to settle the debt.


As the receivables are usually guaranteed by the importer's bank, the forfaiter frees the exporter from the risk of non-payment by the importer. The receivables have then become a form of debt instrument that can be sold on the secondary market as bills of exchange or promissory notes.



Structured Commodity Finance

Structured commodity finance (SCF) as covered by Trade Finance is split into three main commodity groups: metals & mining, energy, and soft commodities (agricultural crops). It is a financing technique utilised by commodity producers and trading companies conducting business in the emerging markets.

hope to hear something else on this topic very soon...:SugarwareZ-055:
 
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