Different Types Of Import Financing Transactions

HSBCWhen running a business, expanding their ventures is imperative to allow them to find better business opportunities and to improve their profits. However, to make international ventures more effective, it is best for business owners to make use of effective import financing transactions. Below are some of the following.

Consignment

One of the main import financing transactions business owners opt for is consignment purchases. With this option, the importer will make a payment to the supplier after the supplies are received. This type of option is ideal for importers since they only need to pay when they receive the supplies. On the other hand, this is very risky for suppliers.

Open Account

Another popular famous import financing option business owners make use of is an open account. This option is mostly used by importers has good credit history or perhaps known by the seller since open account terms allow the importer to pay sellers at a specific date without the buyer issuing any negotiable document evidencing his legal commitment to pay at the appointed time. However, exporters who make use of open account terms are increasingly obtaining credit insurance, which allows them to mitigate the potential open account credit risks.

Documentary Collection

HSBCSome business owners also make use of documentary collection for their import financing transactions. Documentary collection is a term offers a good payment option for both importer and seller. This is possible since the sale transaction is settled by the bank. Plus, when opting for this method, importer is not forced to pay for goods prior to shipment since exporter retains title to the goods until the importer for it.

Letter Of Credit

Finally, some business owners also make of use a letter of credit for their import financing transactions. As of now, a letter of credit is the most widely used trade finance instrument in the world since it is a highly effective way for banks to transact and finance export and import trade. But, in order to attain the benefits of making use of such transaction, business owners need to partner with reliable banking institutions. This is important to ensure that they have the credibility to pay for the goods they are purchasing. Luckily, most banking institutions can offer this service to help business owners make import and trade projects to become more successful.

These are only some of the best import financing transaction business owners can opt for to make their business ventures safer and more efficient.

By: Andy Wilson – Info source from www.business.hsbc.ae/en-gb/growth/productfamily/imports

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