While a seller (or exporter) may ask the buyer (importer) to pay in advance for the goods delivered, the buyer (importer) can reduce the risk by requiring the seller to document the goods shipped. Banks can help with different forms of support. For example, the importer`s bank may provide the exporter (or the exporter`s bank) with a credit credit that provides for payment upon presentation of certain documents, such as the . B of a bill of lading. The Exporter`s Bank may, on the basis of the export contract, insert a loan (by pre-demand) to the exporter. There are many parties to trade finance and can understand that trade finance can help reduce the risk of global trade by balancing the different needs of an exporter and importer. Ideally, an exporter would prefer that the importer pay in advance for an export shipment in order to avoid the risk that the importer would accept the shipment while refusing to pay for the goods. However, if the importer pays the exporter in advance, the exporter may accept the payment but refuse to ship the goods. Banks and financial institutions offer the following products and services in their trade finance sectors. Trade finance is designed to introduce transactions with a third party to eliminate the risk of payment and supply.
Trade finance provides the exporter with receivables or payments in accordance with the agreement, during which import loans may be granted to satisfy trade rules. In other words, trade finance reduces delays in payments and shipments, allowing both importers and exporters to manage their operations and plan their cash flows more efficiently. Think of trade finance as a use of transportation or trade in goods as a guarantee to finance the growth of the business. Among the payment methods used in international trade: other forms of commercial financing may be document collection, credit insurance, fine trade, factoring, supply chain financing or package. Some forms are specifically designed to complement traditional funding. The security of trade finance depends on the establishment of a verifiable and secure monitoring of risks and physical events in the chain between the exporter and the importer. The emergence of new information and communication technologies allows the development of risk reduction models that have become models of pre-financing. This allows for a very low risk of prepayment to the exporter, while maintaining the importer`s normal credit conditions without burdening the importer`s balance sheet. With increased flexibility and volume, demand for these technologies has increased. Trade finance is the financing of trade and concerns both domestic and international trade transactions. A commercial transaction requires a seller of goods and services as well as a buyer. Various intermediaries, such as banks and financial institutions, can facilitate these transactions by financing trade.
Commercial financing manifests itself in the form of ak-credit (LOC), guarantees or insurance and is usually provided by intermediaries.  Although international trade has existed for centuries, trade finance facilitates its development. The widespread use of trade finance has contributed to the growth of international trade.