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Trade Financing In International Trade

Trade Financing In International Trade
Simply put, trade financing provides an answer to the query “Who will pay for the goods and shipping?”. No business wants to pay hefty upfront fees, especially when producing high-value shipments. It’s a rare instance in which the provider is willing to take a chance on receiving payment from a new and untrustworthy consumer a few months later.

Trade financing occurs when an importer obtains financing to pay a supplier and repays the financer after selling their goods. This enables for increased inventory and earnings in circumstances when there is no pre-existing supplier/import connection. Financing arrangements often include a monthly or fixed-interval payout ranging from 5% to 10% of the loan’s value.