Trade Finance FAQ



General FAQ


Q: Is trade finance only referring to Import/Export?
A: Various aspects of trade finance can also be used for domestic transactions.


Q: Is trade finance only for goods? Can it also be for services?
A: Most Import/Export involves goods. However, some services can be financed. Please contact us for further discussion of your needs.


Q: I have a transaction where my customer and supplier are both off-shore. Can you help with financing?
A: This type of transaction can be done if structured properly. Please contact us for further discussion.


Q: I am a trader and need to finance a transaction. Can you help?
A: Yes, we can assist intermediaries in structuring a transaction. However, without proper financial backing, some things, such as commodities, may be difficult to do.



Letters of Credit (L/C) FAQ


Q: My customer insists on paying with an L/C but I know very little about them. Should I accept it?
A: We can assist you with all aspects of L/C’s. We become your “Import/Export Department” and negotiate with the customer and bank.


Q: How does a Letter of Credit differ from a Line of Credit? I asked my local bank officer about a Letter of Credit and he thought I wanted a Line of Credit.
A: Some local bank branches serve the consumer or small business market and therefore would refer you to their commercial centre.

A Line of Credit is a loan. A Letter of Credit is a form of payment... like a bank draft. You can “use a Line of Credit” to “open a Letter of Credit” to pay for a shipment of goods.


Q: When do I use an L/C rather than wire funds?
A: If you have a good relationship with your supplier, wiring funds is the quick and easiest way to pay. Using an L/C gives the buyer a little more “control” over the order, as he can request certain documents from the seller before the seller is paid.


Q: We received an L/C but my bank will not give me any funds to help me ship the goods. What can I do?
A: This is a common problem with many businesses. We can assist you in processing the L/C and getting the product shipped.


Q: We received an L/C payable in 90 days, but need the money now. Can you help us?
A: Term or usance L/C’s are typical in import/export financing. It allows the buyer to receive the goods and re-sell them before his bank pays the L/C. We can assist with accelerating payment on usance L/C’s.


Q: What is the difference between a documentary L/C and a stand-by L/C?
A: In simple terms... a “documentary L/C” requires the beneficiary to submit certain documents prior to payment. A “stand-by L/C” is typically used as a guarantee. Please contact us for a more detailed explanation.


Q: Does it matter what bank issues an L/C.
A: Yes it does. An L/C issued by a top commercial bank is accepted more quickly than one issued by a small regional bank.


Letters of Credit is a very broad subject. If you have further questions, please contact us to discuss your needs.




Forfait FAQ

Q: What is forfait?
A: The purchase of an exporter’s receivables or trade drafts. (Similar to Accounts Receivable Financing, but for Import/Export transactions.)


Q: When do I use forfaiting?
A: Most Import/Export transactions are paid with L/C’s. If your long time customer asks you to invoice him and allow him 60 days to pay, that is an opportunity to forfait.


Purchase Order Financing FAQ
Please click here to go to our specific page ...

Return to top