Most businesses know the importance of having a good working capital management system in place. However, many businesses don’t take advantage of all the different types of financing that are available to them. One type of financing that is often overlooked is pre-shipment trade finance. This type of export trade finance can be extremely beneficial for corporations who want to improve their cash flow and grow their business. In this blog post, we will discuss the benefits of pre-shipment trade finance for corporates.
What is pre-shipment trade finance?
Pre-shipment trade finance is a type of loan that is used to fund the purchase of goods that are being exported. The loan is typically used to cover the cost of the goods, as well as the cost of shipping and insurance.
The loan is typically repaid once the goods have been sold and the buyer has made payment. Pre-shipment trade finance can be used to finance both small and large exports, and it can be a helpful tool for businesses that need to purchase large quantities of goods.
Banks, financial institutions, or specialist trade finance companies can provide pre-shipment trade finance.
Benefits
It is a type of financing that helps businesses to cover the costs associated with the production and shipping of goods. This type of financing is typically used when businesses are selling goods on credit, as it provides them with the funds needed to pay for the goods upfront.
Pre-shipment trade finance can be obtained from banks, Export-Import agencies, or private lenders. The terms of the financing will vary depending on the lender, but most agreements will require businesses to repay the loan within a certain period of time, usually within six months.
Pre-shipment trade finance can be an extremely useful tool for businesses that are looking to expand their export business, as it can help them to cover the costs associated with production and shipping. In addition, it can also help businesses to manage their cash flow more effectively, as they will not need to wait for payment from their customers before they can access the funds.
How to get the most out of pre-shipment trade finance
Pre-shipment trade finance is a financial product that can be used by businesses to help them grow their export business. It is a loan that is provided against the value of an order that has been placed with an overseas supplier. The loan is used to pay for the goods that have been ordered and are repaid once the goods have been shipped and sold to the customer.
It can be used to cover the cost of raw materials, production costs, shipping costs, and any other costs associated with exporting goods. It can be used for both small and large orders and can be arranged quickly and easily.
Pre-shipment trade finance is a flexible product that can be tailored to the specific needs of a business. This can be used to finance both one-off orders and ongoing contracts. It is an ideal way to finance the growth of an export business as it provides funding against firm orders, giving businesses the confidence to grow their business.
It is a secure way of financing exports as it is based on the value of the contract, not on the creditworthiness of the buyer. This makes it an ideal way to finance exports to countries where there may be currency restrictions or where buyers may have difficulty obtaining credit.
It is a risk-free way of financing exports as repayment is linked to the successful completion of the contract. If the buyer does not pay, then the lender will not lose any money as they will be able to recover their funds from the buyer’s bank.
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