Trade finance

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In any transaction, there is a level of risk for both the buyer and the seller. The buyer's primary concern is the quality and timing of the goods received. The seller, on the other hand, is mostly concerned about getting paid.
In order to ensure that each party to a trade has their objectives met, and to avoid business grinding to a halt, a series of risk management tools have been developed to enable transactions to be settled in good order.
These tools are referred to collectively as trade finance solutions, and the payment terms inherent in the various products provide more or less protection to one other party in the transaction.
Sarah Boyce, Associate Director of Education, ACT, The Treasurer, July 2015, p43


Trade finance and international trade financing include the use of open account, export credit insurance, guarantees, supplier credits, buyer credits, and the use of different price bases and terms ('incoterms').

Trade finance also incorporates instruments and documentary credits such as letters of credit, acceptances, bills, and evidentiary documents such as bills of lading.

The scope of trade finance extends through domestic trade financing, supply chain finance and electronic systems, as well as the areas outlined above.


See also


Other link

Trade finance around the world, Centre for Economic and Policy Research, 2016