There are various trade finance products that you can use for your business

Trade finance is designed to help entrepreneurs to carry out business transactions without difficulty, and there are several trade finance products that are brought into use by bank and finance organizations to help the cause of businesses. Trade finance essentially helps to finance a trade and may apply to both domestic and international business transactions.

Trade financing needs a seller of commodities or services and a buyer who wants to buy them. The transpiring financial transaction is a deal between these two parties and is taken care of by financial institutions and banks by them agreeing to finance the particular trade. The financial support to trading by banks and financial institutions comes in various forms such as loans, letters of credit or billing documents. Other forms that are used for financing include trade credit insurance, documentary collection, forfeiting or factoring.

Here are some of the trade finance products that banks and financial institutions extend towards clients.

Bank Guarantee: This is a promise extended by a financial institution or bank in favor of the beneficiary and on behalf of the applicant. If the applicant fails to fulfill the contract financially or by performance, then the guarantor bank would make the guarantee amount to the beneficiary when it receives a claim or demand from the beneficiary. There are several types of bank guarantees offered by banks, and they include Tender Bond, Performance Bond, and Advance payment, Retention, Labour and Financial.

Letters of Credit: A letter of credit is extended to the buyer/importer by a bank or a financial institution if the exporter/seller presents the relevant documents of purchase to the bank or institution designated by the buyer. When the documents specified in the contract or agreement is received by the designated bank or institution, it will make the related payment to the seller or exporter.

Collection and discounting bills: This transaction mode is a major service provided by the banks. In this mode, the Seller’s bank collects the payment from buyer’s bank or buyer on behalf of the Seller, against the sale of goods by the seller. This is done in accordance with the agreement between the buyer and seller.

There are many more trade finance instruments that are used which an applicant can use to continue business in times of financial shortcomings. It is advised that the terms and conditions of any agreement are well understood before entering into an agreement with a bank or financial institution.

Private funding for such a venture is, therefore, a better option because they can waive several restrictions governing the loan agreement while offering import finance to those who have a bad credit history for example