SUISSE BANK PLC - Blog's

SUISSE BANK offers private and corporate digital bank accounts, blockchain banking and trade finance for its world wide clients under the offshore license.

Is Trade Finance Right For My Business?

Fast-paced globalisation and technological advancements have made it simpler for businesses to expand their operations globally, grow and maximise their revenues. However, there are significant risks too, including “payment” and “supply” risks. Trade finance helps mitigate the risks related to international trading by addressing the challenges of exporters and importers.

 

It represents a wide spectrum of financial instruments that businesses use to facilitate global trade and commerce. Unlike conventional credit issuance or business loan, trade financing primarily protects against the inherent risks of international trade – political instability, currency fluctuations, the creditworthiness of the parties to trade, or problems arising due to non-payment.

 

During international trading, the supplier would want the importer to pay upfront to mitigate credit risks. On the other hand, the importer may face supply risks wherein the exporter may not fulfil the order according to the trade agreement. Trade finance instruments issued by banking and financial institutions such as SUISSE BANK PLC can help reduce the risks and ensure smooth trading.

 

Some of the most widely used trade financing instruments are:

 

  • Bank Guarantees: Through bank guarantee, a bank or financial institution underwrites a promise of payment. If the customer does not meet certain obligations as mentioned in the trade agreement, the financial institution will pay the amount to the concerned party on behalf of the customer.

 

  • Letter of Credit: Through a letter of credit, the importer’s bank ensures that the former is financially viable to honour the financial transaction. The issuing bank underwrites making the payment once the exporter ships the products and fulfils the terms of the trade agreement.

 

  • Proof of Funds: It is a financial statement issued by the bank, ensuring that the customer (importer or supplier) has the financial viability and credibility to complete the trading transaction.

 

  • Warranties: It is a third-party payment guarantee issued by the bank on a promissory note, bill of exchange or a debt obligation, facilitating an international trade agreement.

 

In addition to minimising the risks of non-receipt of goods or non-payment, trade financing by leading financial institutions like SUISSE BANK PLC can help streamline operations, improve efficiency, and generate increased revenues.