The potential profit from trading on the international market is staggering, but as with any venture with a high payoff it is not without risk. Thankfully, services such as import financing from HSBC, along with other import and export services such as shipping guarantees exist to take some of the danger out of trading across borders – here’s a little more detail about these services that banks provide and how they can help your business.
Import services cover a range of topics, but two of the most important are documentary credits and shipping guarantees. With a documentary credit the bank substitutes its own credit for that of the importer and agrees to pay for a shipment, provided the exporter submits the required documents within a prescribed time limit. Payment will then only be made upon presentation of these documents. This means the bank takes the financial risk rather than the importer, providing more financial security for international trade.
A shipping guarantee issued by a bank is ideal in situations where an importer receives goods before shipping documents have passed through the banking system – this allows the importer to take possession of the goods without the shipping documents and avoid delays. This is especially important for importers receiving spoilable goods which may lose their freshness in the time it takes to receive the shipping documents, and for importers working to tight financial budgets that might not have the cash flow to pay for storage or demurrage charges.
If you are exporting goods, documentary credits are still available, but you could also consider using a documentary collections service: the bank will dispatch a specialist who will act upon your instructions to release documents that cover the shipment of your goods once they have been paid for, or a payment agreement is in place.
Export loans are pretty much what they say on the tin – exporters can receive pre- or post-shipment finance. Pre-shipment loans can alleviate some of the pressure on your cash flow as you prepare to complete your shipment orders, while with post-shipment finance the bank will advance funds against a shipment you have already made rather than having to wait for the importer to pay, again easing cash flow.
Banks can do a lot to make international trading safer, so whether you’re considering entering the international market or are already in it consider opening a specialist international trade account.