Efficient trade finance services offered by financial institutions make trading easy

Efficient trade finance services offered by financial institutions make trading easy Trade finance denotes the financing of a trade, and it encompasses both domestic and international trade exchanges. A trade exchange requires two players - namely the seller of goods and services and the buyer of the goods or services. Financial institutions are the third players who finance the transactions and ensure the smooth conclusion of trading.

Why do you need a bank or a financial institution to finance the trade? This is a valid question, and the answer is that a seller or exporter would require the buyer or importer to make the payment in advance against the goods he has ordered. On the other hand, the buyer will require the exporter to document the goods he is shipping before he makes the payment. This is a stalemate that cannot be solved by both parties so the third party, the bank or a financial institution, steps in and soothes things by financing and guaranteeing the shipment.

The bank of the buyer will give a letters of credit to the exporter or to the exporter’s bank, and the payment will then be made by the importer’s bank to the exporter when they produce the documents such as bill of loading to the importer’s bank. An exporter can also avail an advance payment from the exporter’s bank by producing the export contract. Trade finance also includes trade credit insurance, documentary collection, factoring or forfeiting.

Davenham Trade Finance UK offers several forms of financial support to traders, and they can use those products to carry out their trading locally or internationally in an efficient manner. In trading the element of doubts always remains hence both the participants start mistrusting the integrity of the others when they trade with each other. International trading is impossible to carry out really without the guarantee of the financial institutions because two people coming from different parts of the world hardly have any reason to trust each other so they will require an authentic party to guarantee the transaction so that nobody is cheated.

The various products and services provided by Davenham Trade Finance UK include letters of credit, bank guarantee, collection and discounting of bills and several other trade finance instruments.

Advanced communication technology has made the trade finance transaction much easier for everyone involved. Gone are the days when exporters waited for the documents guaranteeing the payment to arrive before they ship the ordered goods. Now it is transacted at lightning speed and just at the click of a button.