Methods of Financing International Trade
In this topic, you will learn about various methods used to finance international trade, including prepayment by the importer, letters of credit, export credits, and bank loans. These methods provide security for both buyers and sellers, ensuring smooth transactions and delivery of goods. Understanding these financing options is crucial for successful international business operations.
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Presentation Transcript
A2 FINANCINGOF INTERNATIONAL BUSINESS Did you know 10 multinational corporations control nearly everything you buy? Can you name them? FINANCING OF INTERNATIONAL BUSINESS
FINANCINGOFINTERNATIONALBUSINESS In this topic you will learn about Methods used to finance international trade, e.g. prepayment by the importer, letters of credit, export credits, bank loans
FINANCINGOFINTERNATIONALBUSINESS There are a variety of methods used to finance international trade: prepayment by the importer The exporter will arrange for the buyer of the product to send payment before it is delivered This ensures that the exporter is paid for the products that are being exported This provides security for the exporter, knowing that they do not have to worry about credit control It means that it will have greater liquidity as cash flows into the business before the product has actually been sold
FINANCINGOFINTERNATIONALBUSINESS There are a variety of methods used to finance international trade: letters of credit A bank guarantee that the seller of a product will receive an agreed payment from the buyer This provides security for both parties This transfers the risk from the seller to the bank At the same time, the buyer receives documents to prove that the seller will uphold their end of the transaction i.e. deliver the product
FINANCINGOFINTERNATIONALBUSINESS There are a variety of methods used to finance international trade: export credits Financial support or guarantees that are given to foreign businesses to help in buying goods or services from UK exporters These are often provided by financial institutions or export credit agencies They might also be provided by the exporter themselves in order to create custom This means that the business will have to fund the export itself, deferring payment to a later date
FINANCINGOFINTERNATIONALBUSINESS There are a variety of methods used to finance international trade: bank loans This is a more traditional style arrangement, with businesses borrowing directly from financial institutions to import products Banks have vast experience of international business and can be a great source of financial and non-financial support for businesses looking to trade globally Interest will have to be paid on the loans This tends to be at a fixed rate over a specific period of time A.P2 Explain the types of finance available for international business.
FINANCINGOFINTERNATIONALBUSINESS Compare what Barclays, HSBC, Lloyds and Natwest have to offer for financing and assisting international business. Which bank would you choose?
