You perform buy-sell, import-export, and trade operations, and you want to obtain financing by letters of credit, documentary credit, bank guarantee, and so on.
There are various tools that can help to finance your merchandise and increase your sales.
The bank acts as your operational financier, either by funding your goods or by issuing a letter of credit after securing the funds, paying the other party only once the transaction has been completed in accordance with the conditions set initially.
Who needs Trade Finance?
The Trade Finance tools, letters of credit, bank guarantee, and others, are intended for any company wishing to obtain financing for its inventory or exports, as well as companies wishing to secure their funds by issuing a letter of credit instead of physically moving funds to their suppliers when making payments.
In order to apply for Trade Finance at a bank, you must be able to put together a dossier showing experience, actual operations, logistics, etc. In short, the bank must have a complete understanding of your operations from A to Z.
Your dossier must be assembed to include the following items.
- Presentation of the business
- Presentation of the product(s) sold, with photos, datasheets, and other (visual) displays
- Define the geographical areas of supply, the names of suppliers and clients, as well as the FOB/CIF conditions
- Provide sales and purchase contracts and invoices
- Indicate whether the goods are insured during the trip
- Specify the name of the inspection company (example: SGS, Bureau Veritas) controlling the goods
- Provide the company’s balance or at least a recent accounting statement
- Present an entire transaction that’s already been conducted
- Present the B/L
In general, banks finance no more than 70-80% of the transaction, which requires you to make a contribution of 20 to 30%.
See also our page on Bank Guarantees.