What you need to know about trade financing
Trade finance & services
Finance is an important element of any business responsible for bringing in the financial capital required for furthering business prospects. Finance is also a part of sourcing funds, managing funds and spending funds judiciously. Finance function often impinges on domestic as well as overseas business operations.
Trade finance is a vital subset of overall finance function dealing predominantly with trade operations. Trade finance is more relevant when it comes to international operations. Here, the businesses concerned need services in two countries where different trade norms could apply involving the sale of goods and services as also exchange of currencies in relation to payments. Trade finance assumes significance because it helps both parties in a cross-border transaction to transact with minimum fuss where the seller gets paid for the sale of goods or services to the buyer and the buyer gets the goods or services delivered as per terms and conditions of the sale. Trade finance helps to make the transaction smoother for both parties as also to reduce delays in consummating the transaction thus reducing trade risks for both parties.
Contours of trade finance services
Typically, trade finance services deal with commercial and international trade and monetary activities such as
Providing finance to consummate a trade is an integral part of any trade finance activity. The financier helps the process of trade by filling the trade cycle funding gap. The function of trade finance is to act as a third-party to remove the payment risk and the supply risk, whilst providing the exporter with accelerated receivables and the importer with extended credit.
The financier seeks certain facilities from the buyer and seller that include
Thus, trade finance helps seller and buyer to mitigate their respective risks through extending credit to the importer and making faster payment to the exporter.
IDFC Bank Trade Finance Features
IDFC Bank is among the leading trade financiers in India with an excellent track record for financing all kinds of trade – large and small.
The various services under trade finance include
Cash management services
IDFC Bank’s Cash management services provide focus, efficiency and convenience with a host of features such as
Trade finance and services
Businesses involved in export and import can benefit from IDFC Bank’s trade finance services that offer a comprehensive suite of solutions that include
Escrows or a means of mitigating risks and complexities of commercial transactions and IDFC Bank’s escrow services provide several options comprising
IDFC Bank offers unified portal services that can connect anytime from anywhere through
Forex, derivatives and fixed income
Customized hedging solutions for currency risks is a facility from IDFC Bank that helps buyers and sellers through
IDFC Bank offers a number of financial instruments through which it lends to businesses to provide trade finance to consummate a trade. Some of them include
Treasury and capital markets
IDFC Bank offers treasury and capital markets services that are customer-centric which include
Trade financing is often short-term lasting for the period that the trade gets consummated. It allows both parties to concentrate on their core competencies leaving the trade financing task to intermediaries such as IDFC Bank. It also protects against risks inherent in any international trade – political instability, currency fluctuations, non-payment issues or lack of creditworthiness.
IDFC Bank is at the forefront of using technology to offer services to its clients. It is looking at digitization of trade finance through robo-advisors, smart contracts, block chain, remittance apps, cryptocurrency, RegTech and InsurTech. These would help improve transparency, mitigate risks, lower fees, eliminate paperwork and lower transaction costs. Accessing trade finance from IDFC Bank is quite easy and quick through its user-friendly online platforms backed by robust back-office structure.