November 30, 2020 By admin Off

Trade Financing – Everything You Need to Know

Are you looking forward to financing your trade? You can procure funding, guarantee, or insurance from your bank for carrying out import and export, along with domestic trade. The columbia bank sayreville and various other banks can facilitate such transactions.

Types of Trade Finance

Letter of Credit: Assurance to the seller that the bank will make the required payments on behalf of the buyer if the seller provides certain documents. It may be in case the seller asks the buyer to make an advance payment.

Documentary Collection: The seller can request its banks to forward export documents such as a bill of lading, certificate of origin, and more. These documents are released once the buyer has paid in advance.

Bank Guarantee: As the name explains, it is a guarantee taken by the bank on behalf of the applicant to the beneficiary. The bank undertakes this responsibility in case the applicant is not able to make the payment or required performance. In such a scenario, the bank will make the payment of the guaranteed amount. It can be of various types:

  • Payment in Advance
  • Labor
  • Tender Bond
  • Financial
  • Basic Analysis
  • Retention
  • Performance Bond

Discounting and Collecting Bills: It includes the collection of payments and proceeds by the seller’s bank. Collection may be from the buyer itself or the buyer’s bank. The entire process is conducted in accordance with the predetermined agreement between the buyer and the seller.

Columbia Bank
270 Main St, Sayreville
NJ 08872, United States
Phone: +1 732-432-9680

Payment Methods for Trade Financing

The bank may make or receive the supporting finance in the following ways.

  • Advance payment- approximately 30% during the order and 70% after shipment.
  • Bills of exchange or collection of documents
  • Letter of credit as a guarantee of payment
  • Open accounts of both—the buyer and the seller in the correspondent banks.

Apart from the ones mentioned above, the types of trade financing include Supply Chain Finance, Finetrading, Trade Credit Insurance, Factoring, and Forfaiting. You can double-check with your bank to decide the type of financing you want.