 |
 |
 |
| IMPORT FINANCING |
| |
|
TRADE
FINANCE / IMPORT FINANCE always involves
at least two parties the seller / exporter and the buyer
/ importer. The importer and the exporter settle their
payment mechanism in various ways. The method utilized
depends on the risk appetite of the exporter as to how
much payment flexibility it will give to its buyer the
importer starting with Open Accounts to Letters of
Credit. |
| |
| Import
Financing is done in various ways: |
|
| |
|
|
1. |
Open Account: The Exporter ships and delivers
the goods to the Importer on good faith that the
Importer will pay. This method is used in inter
company transactions; in a buyers market, or
where the Exporter and Importer have two way off
settable trade flows, or where the two parties
have long standing very good relationship. |
|
|
|
|
|
2. |
DP: Documents against Payment, here the
documents are released to the importer only
after Importer has paid. |
|
|
|
|
3. |
DA: Documents against Acceptance, here the
documents are released to the importer after the
Importer has Accepted the Draft. |
|
|
|
|
4. |
Letter of Credit, here a third party bank
takes over the liability of paying the Importer |
|
|
|
|
Generally commercial banks get involved in trade
finance. Most countries also have their
dedicated facilities to support their exports in
the form of Export Import Banks. The US has its
own Export Import Bank (EXIM BANK) which is very
active and has many different programs from
short term to medium and long term facilities.
|
Purchase order financing often involves import
financing and the above methods particularly LCs
and DPs are used. The specialized Purchase Order
Financing institution would use their banks to
open the LC or have their banks pay the exporter
or accept the draft drawn on the importer if the
exporter has shipped the goods on time and on
specifications.
The importer has to consider various regulatory
issues while importing: duties, tariffs, quotas,
hazardous materials, FDA requirement, best mode
of transportation, country of origin
restrictions, etc. Also while negotiating with
the supplier has to decide on what basis to
purchase the goods such as FOB, CIF, DDP, etc.
(Please see the Letter of Credit section). |
 |
|
|
|
Finding the right supplier can be key. This will
ensure that the goods are delivered on time in
the quality and quantity required so that the
importer meets its obligations to its buyers.
Having an experienced Purchase Order Financing
working with the importer can also be critical
as the PO Finance company will not only provide
the capital but also provide the required
logistic discipline.
Please contact Ashford Finance for your import
funding needs. |
|
|
|
| |
|
|
|
|
|
