What happens in a day in the life of a Trade Financier..??
A Trade Financier is someone who works with a Trade Finance company like the one featured here.. In very simple terms a Trade Finance company deals with “financing of international trade”..
Trade Finance companies are present all over the world in all major trading hubs..
The day described in this article is a typical day in the life of a Trade Financier working for Trade Finance Global..
A Trade Financier’s typical day involves working with clients looking to export or import goods from around the world, looking at their requirements to match them up with relevant funders or banks. We will advise on structures, funding partners or what can be expected when clients have queries.
Most commonly, we will work with our clients to have a Letter of Credit (LC) issued, which guarantees payment to the exporter through a bank or financier. For example, the bank could issue funds to an exporter once it has received proof that the item has been shipped.
The beauty and complexity of LCs is often tricky for SMEs to grasp – their flexibility allows funders to create a contract which suits both the importer and exporter, allowing both parties to share equal risk.
There are several types of LCs,
- Confirmed – an LC is confirmed once the exporter’s bank has added obligations to the issuing (importers) bank.
- Unconfirmed – Some LCs can be unconfirmed, which means the LC is only guaranteed by the issuing bank (not the exporter’s bank). This is the most common type of LC in terms of what we deal with at Trade Finance Global, although it is often not the case where the jurisdiction is in economic or political unrest.
- Revocable – LCs can also be changed by the beneficiary (with no notification to the beneficiary if they are revocable.
- Irrevocable – However, under the most recent UCP 600, only irrevocable LCs should be issued (approval, change, or cancellation of the LC must be agreed by the beneficiary and the issuing bank).
Documentation is one of the biggest challenges we see when we help SMEs get LCs. In order to help process the transaction, funders need to see various documents, from business plans to invoices, as well as shipping documents and information from the exporters.
The funders often need to see as much detail as possible to assess the inherent risks. These can include fraud risks (which is why credit checks often occur), legal and regulatory risks (which is why trade finance lawyers need to check LCs), and insolvency or buyer risks (which is why a funder would check balance sheets and accounts of the company seeking trade finance).
The financing package will also have to suit the specific transaction being entered into e.g. short term stock and vehicle finance would be needed for a business to business car seller and not a bid bond.
After we have understood the needs of a company, we will ensure that the business owners connect with the most appropriate funders on the negotiated best terms.
A lot of our work is also spent educating SME owners on trade finance – the benefits, challenges and risks, as well as what can and cannot be exported or imported.
We work with various institutions and blogs to publish specific guides and help SMEs access trade finance to help them grow.
Would you like to be featured in the “A day in the life of” series..?? Feel free to send me your details..
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