Why is trade finance important?Without trade finance, pre-shipment finance does not really work. Exporters need cash at shipment. Trade finance is how this is managed and the lack of a customer-friendly trade finance product is hurting supply chains around the world.
Blockchain and trade finance: whitepaperIt is important to be cynical about blockchain and to cut through the hype. But trade finance offers a compelling set of use-cases for the deployment of simple ledger verification – and, in time, smart contracts. Our whitepaper on how to use blockchain in trade finance is here
Digital trade finance – the basicsAn online trade finance system should always include important functionality in order to be useful to exporters (for export finance) or importers (for supply chain trade finance). Find out what you should look for.
Export Finance: the basicsExport finance helps exporters to offer credit to their buyers. This means that they can offer "ship, get paid" terms to buyers - and this is what buyers want. Export finance is provided by a specialist like PrimaDollar.
Supply Chain Trade FinanceSupply Chain Trade Finance is a breakthrough for large multinational corporates whose supply chains stretch into international markets. It has been invented by PrimaDollar.
Trade finance and logisticsFreight and finance are merging. Global trade is a huge market with significant financing needs. It is poorly served by legacy products from banks. We have a better product (see here) which is quicker, cheaper and simpler.
PrimaDollar: why us?Backed by a strong network of international shareholders and financiers, PrimaDollar is the emerging leader in trade finance. Ship, get paid.
Open Account: the basicsOpen account means exporting on the basis of "ship now, pay later". Export the goods. Buyer promises to pay later. Trust the buyer to pay. It is called different things in different countries. For example, it is also referred to as exporting on "DA terms" or "sale contract".
PrimaDollar – our businessPrimaDollar is a UK-based trade finance platform working with exporters and importers on a global basis. We have a global network of offices and we work with buyers across the world.
Trade finance and marketplacesMarketplaces are platforms that enable trades to be executed between suppliers and buyers. Adding trade finance to a marketplace enables the provider to increase revenues and build loyalty amongst participants.
PrimaDollar CalculatorThe calculator can be used by exporters to find out our pricing if they choose to work directly with us. We provide a simple product at a simple price. You can price your export trades online without having to call us.
Supply Chain Finance (SCF)Supply chain finance (or SCF) refers to a funding program implemented by a buyer to provide early payments to his suppliers. It is, maybe, a US$1 trillion industry today. It typically works like this:
Trade Finance: general risksTrade generally involves the creation of trade receivables. These arise where the exporter ships, but the buyer pays later - a "ship now, pay later" trade. The obligation of the buyer to pay later is a receivable – a “trade receivable” – which is really a fancy name for an outstanding invoice.
Letter of credit: the basicsA letter of credit ("LC") is a flexible and internationally accepted form of financial guarantee. Most of the time they do not provide any guarantee and PrimaDollar provides a cheaper and better alternative. But this is what an LC is.
Discrepant Letters of Credit (LC)Many exporters ask their buyers to arrange a letter of credit believing they have a guarantee. Nearly all letters of credit fail to provide any protection - they are discrepant. What happens next?
Documentary CollectionDocumentary collection is a system to help exporters. It is used by exporters to ensure that control of the goods is retained until the buyer has checked he is getting what he expects before committing to pay. PrimaDollar can organise this via our bank, but our online system does it better.
Open Trade Finance for exportsOpen trade finance is a simple, low cost and collateral-free way to finance international trade. Trade finance is needed when an exporter wants to be paid at shipment but a buyer wants to pay later.
Basel 3 and Trade FinanceBasel 3 requires banks to keep high levels of capital against trade finance including letters of credit that they issue. Many banks are reducing or pulling out of trade finance services as a result.
Incoterms: the basic definitionsIncoterms are terms like: FOB, CIF, DDP - and you will find them specified on purchase orders for the manufacture and import of goods. Incoterms are established by the ICC, and were last revised in 2010, so you should always see the reference being to "Incoterms 2010". This is important.
Trade Finance: landscapeInvestors, lenders and corporates are bombarded with propositions involving trade finance and trade receivables, especially from the new breed of alternative trade finance providers. This guide sets out the different business models and what they aim to achieve, splitting the market into three main
Dual Factoring: the basicsDual factoring is the process of coordinating two factoring companies so that one of the companies can purchase an invoice from an exporter in one country and relying upon the other factoring company to collecting the amount due later from the buyer in another country.
Trade Finance: commingling riskThis is a risk for an investor who finances a portfolio of trade receivables. Commingling risk is a catch-all term for the risk that the buyer pays but the investor does not receive the money. The cash that the buyer paid gets lost or absorbed in transit.
Ship now, pay laterThis phrase describes how many buyers would like to source goods. They would like the exporter to ship first, allowing the buyer to pay later. But this can be problematic, if no support is provided, for many reasons:
Trade Finance: performance riskInvestors who finance a portfolio of trade receivables or an individual trade receivable face performance risk. Performance risk is the risk that the buyer, who owes the money, can legitimately avoid paying because the supplier has failed to do a good job.
Trade Finance: fraud riskAll businesses face a risk of fraud – whether that is coming from their customers or from inside the company. Mitigating fraud risk involves procedures. Good working practices reduce the risk that a fraud can occur by detecting or deterring the activity before it can cause a problem.
Trade Finance: credit riskInvestors who finance a portfolio of trade receivables or an individual trade receivable face credit risk. Credit risk is the risk that one or more parties involved in a trade receivable are unable to meet or do not meet their financial obligations.
Import finance: accountingWhen trade finance, supply chain finance or supply chain trade finance is employed, buyers need to pay attention to the accounting treatment for the arrangements that are involved.
Landing the shipmentThe process of importing goods involves "landing" them. Landing happens when goods have reached the import terminal and is the process of getting the goods through import customs. The shipped goods are physically handed over by the freight-forwarder, often to a customs broker working for the buyer.
Retailer Credit RiskThere continue to be high profile casualties in the retail sector catching many exporters by surprise and leaving them with big losses. The retail landscape is changing around the world and there are winners and losers.
Shipping Documents: the basicsShipping documents are involved in the export and import of goods. The exact set of documents varies from trade to trade, and depends upon the incoterm that applies.
Verification lettersA verification letter is a short letter referring to one or more commercial invoices, signed by the buyer and addressed to the trade financier. The letter confirms the buyer's confidence and satisfaction with his chosen supplier and the performance of the trade, and also acknowledges that the trade
Islamic Trade FinanceThe Shari'a is a body of rules based upon the Quran. Complying with these rules forms the basis of modern Islamic finance. In the Quran, there is a great amount of guidance as to how life should be lived, covering many topics. In relation to finance, some of the main rules can be summarized as:
International FactoringInternational factoring is the process of purchasing an invoice from an exporter in one country and collecting it later from his buyer who is in another country. This means that the exporter has been paid upfront, and the buyer can pay later.
First Dollars – Second DollarsExporters, like any business, have different sources of finance at different costs. The cheapest source of finance can be called the first dollars. These first dollars usually come from their local bank and are low cost because the bank takes collateral and sets a prudent limit on risk.
Sell it before you pay for itSounds like a great idea. But it may not be very smart. "Sell it before you pay for it" - receive goods from your suppliers and pay for them later, after you have sold them. The more you buy, the more cash you generate. What's not to like?
Buying Houses – introductionBuying houses are a fact of life in the import and export markets of South Asia - India, Bangladesh, Sri Lanka, Indonesia, Myanmar, Pakistan ... Whilst many large buyers deal direct with factories, many mid-sized and smaller buyers work through middlemen that are commonly known as "buying houses".