to an exporter, with-recourse basis, against either an export sell contract/ perchase order (not our bank practice) or against a Letter of Credit.
Key benefits to exporter
+ The exporter is offered credit terms so that it can add flexibility to its cash flow.
1. Procure raw materials.
2. Process and pack the goods.
3. Ship the goods to the buyers.
4. Meet other financial cost of the business.
5. Secure warehousing
+ Non payment risk or buyer risk: the risk that the foreign buyer does not pay exporters.
+ Non performance risk or supplier risk: the risk that the exporter will not fulfill the export order, cannot manufacture the product for technical reasons,
or cannot deliver it on time and according to the price and quality standards identified in the export purchase order or the letter of credit (L/C).
+ Third party risk: other risks that are involved in the transactions process, such as risks related to transport, bank, country risks, international regulation risks
ie. Antimoney Laundering, Economic sanction, Financial crime.
How to mitigate risks
Be a ware of the following terms:
+ Promissary note?
Protect against non payment
+ Document of title ?
Allow the holder to hold the possession of that of title
+ Credit rating ?
+ Warehousing managment?
The control the movement of goods
+ Trade credit insurance?
To secure buyer payment risk
+ Loan guarantee by third party
Add gurantee to the preshipment finance
+ Transportation and insurance
Holding possession of goods until the documents is presented and Insuring any lose or demage during the shipment of goods.