Export Financing- Giving Edge to Suppliers

Posted on March 7, 2019 by admin

Introduction :

The credit of the export supplier is a medium- and long – term financing facility provided to the exporter by export country banks. The export country’s purpose is to promote its export of capital goods and services, such as homebred mechanical and electrical products, complete equipment and engineering projects contracted overseas. Loans granted should not exceed the overall export cost balance minus.

Characteristics :

The new buzz word in the financial sector is an alternative source of funding. As institutional investors increasingly see a piece of peer – to – peer grabbing, many call it the next banking level. A look at the frenzy – fuelled segments :

1. For the exporter, on the one hand, the financing channels of the exporter are expanded, and on the other hand, the financing costs of the credit of the export supplier under ECA items (insurance, guarantee or direct financing) are significantly lower than that of the average commercial loans. Because the business objectives of export countries’ ECAs is to implement national policies rather than to make profits and thus the premium rates (or the rates of guarantee) and the loan interest rate are always lower than the market average.

2. Compared to the credit of the export buyer, the credit of the export supplier requires the lender and the exporter to be in the same country, resulting in an easier operation.

Export funding is a key competitive factor for exporters and may increase their contract signing opportunities. There are several advantages in having the Bank handle and finance the transaction for both importers and exporters. Export advantages:
  • Gain a competitive edge by offering to finance to prospective buyers.
  • Receives cash payment upon shipment or commissioning Does not tie up assets.
  • Evicting credit, currency and interest – rate risks during the settlement period.
  • Does not require the use of administrative resources to collect debt.

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