Import Finance Facility

Loan granted to finance importation of raw materials or finished goods.

An Advance facility offered specifically to facilitate the importation of current/working assets

Import Finance Facility may be availed via Bas (Banker Acceptance), CPs (Commercial Paper) or ODF (Overdraft Facility) in non-checking accounts Associated risk includes new or unforeseen regulatory policy, supply, demand, unpredictable fluctuations in FX rates, improper (over/under) invoicing

Modes of Payment In International Trade

  • Open account – seller dispatches goods to the buyer (without payment) with an agreement to make payment within a specified period
  • Bills for collection – seller dispatches goods to the buyer with an agreement that the buyer makes payment within a specified period but underlying document delivered to its banker
  • Advance payment – buyer pays the seller before goods are dispatched
  • Letter of credit – debt instrument issued by a bank on behalf of its customer to make payment to third party against certain stipulated documents

 

Letter of Credit

  • Governed by Uniform Customs and Practice for Documentary Credits
  • (UCP 600)
  • Applicant – buyer
  • Issuing bank – buyer’s bank (resident in buyer’s country)
  • Advising bank – seller’s bank (resident in seller’s country)
  • Beneficiary – seller

 

Modes of LC Payment

  • Sight payment
  • Deferred payment
  • Acceptance Negotiation