Put simply, it is the buying and selling of goods by businesses from one country to another. The person selling goods from a country is the exporter, the person bringing the goods into a country is the importer.
- importing is subject to regulations by the country of the buyer and in many countries, importers require licences to import certain goods, or to engage in importing the buyer must pay tariffs, duties and comply with those regulations.
- however, importing raw materials or finished goods can be beneficial for businesses who are looking to provide new products to their customers, take advantage of exchange rates, reduce production costs, or guarantee goods for their supply chains.
- trade finance allows business to buy finished or incomplete goods from international suppliers on credit from a lender using trade finance facilities or other trade finance products. It is usually secured against the goods being purchased or the receivables created by the importer when he sells those goods to its customers.
- once the terms of the import finance facility and repayment terms have been agreed, the lender will approve payment to the supplier using a trade finance document, usually a letter of credit. This makes payment conditional on provision of documentation proving the goods have been shipped, such as a bill of lading.
Export finance supports sellers who want to sell goods to international buyers. Our client’s often ask our legal experts, what are the financial benefits of exporting to a business and our response is realisation of profit and business growth. Exporting a product to an international market can mean more customers for that product which results in more sales and hence profits from those sales.
Our experts have a breadth of knowledge and can advise on the numerous types and structures of export finance depending on the business seeking finance and the nature of the export transaction. For example, when a buyer is also using trade finance tools, then exporters may be provided with a letter of credit from the buyer’s financier who will arrange for release of goods and payment on the basis of conditions specified in their contract.
However, if the buyer is offering traditional repayment terms (usually, within a time period after the goods are received by the importer), exporters may face lengthy trade cycles and financial uncertainty. Here, receivables or invoice finance can be used to advance payment to exporters by a factor/financier to ease cash flow pressures.
Please contact one of our friendly expert import and export trade finance solicitors now for your import and export trade consultation. At Francis Wilks & Jones, we have a team of trade finance experts ready to take your call and help you use import and export trade as a way to grow your business. Whatever your question, we can help you.