Parties involved in Trade Finance Presented by: Sharmila KC

Trade Finance Trade finance is the process of financing certain activities related to commerce and international trade. Trade finance is a short-term credit availed by a bank to their borrower for importing and exporting activities. Trade finance includes such activities as lending, issuing letters of credit, factoring, export credit and insurance.  Various intermediaries such as banks and financial institutions can facilitate these transactions by financing the trade.

Parties involved in trade finance Buyer Seller Manufacturer Carriers Insurance company Government and trade organizations

Buyer / importer Is the one who is willing to buy specific goods or services, to find a seller and place the order. A buyer's main goals are: to receive goods or services in required quality and quantity; to receive goods or services in specific destination and time; to pay to a seller as later as possible and only when the seller is fulfilled its liabilities in full; to receive financing for buying goods or services.

Seller / exporter  one who is willing to sell specific goods or services, to find a buyer and arrange the delivery. A seller's main goals are: to be sure that a buyer will fulfill its payment liabilities; to receive financing for goods production and preparation; to deliver the goods or services as soon as possible; to receive payment in specific amount and time.

manufacturer Manufacturer - one who produces the goods or services. May sell the goods by himself or using other companies as sellers. A buyer's bank may assist in:  searching for suppliers all over the world;  consulting the buyer and protecting his interests; preparing and checking the documents; sending the payment; financing related to a purchase.

A seller's bank may assist in: searching for buyers all over the world;  consulting the seller and protecting his interests; preparing and checking the documents; receiving the payment; financing related to a sale.

Carriers Goods may be transported using air, land, sea and mixed (multimodal) ways of transportation. It depends on geographical location, goods character, requirements of a buyer or capabilities of a seller. Carriers include shipping companies, postal services, courier services, air carriers, railroad companies, haulers and etc. Carriers usually provide transport documents, which confirm the goods delivery and delivery conditions.

Insurance companies Insurance companies cover risks of goods loss or damage during the delivery. Insurance cover may be provided by either seller or buyer, and the amount of covered risk depends on the contract terms and delivery option.

Government and trade organizations Different organizations like chambers of commerce, trade unions, inspections companies, customs and etc. are directly or indirectly involved in trade operations. The same is for exporting countries. Exporters may have to receive the export license, to complete the pre-shipment or sanitary inspections, to fulfill the customs and government requirements for some categories of goods.

Roles and responsibilities Good faith in contract execution Legal provisions of contract Appropriate performance of contract. Reasonable conditions and terms of contract. Basis or clear functions for negotiation. Ways to deal with financial intitutions. Terms regarding delivery and payment.