One form of financing that exporters can get is a letter of credit. Also known as a documentary credit, this is a form of financing where payment to an exporter is facilitated by a bank. The arrangement is given as long as an exporter complies with the terms and conditions laid out in the letter of credit. Export letters of credit put the credit risk on the bank or institution that has issued it. A letter of credit that is irrevocable cannot be canceled or altered unless all the parties that involved are in agreement about making a change.
Letters of Credit
Letters of credit give an exporter assurance that they will receive the payment due to them as long as they comply with all the terms of the letter. The exporter relies on the creditworthiness of the bank that issues that the letter rather than that of the importer.
The terms of a letter of credit can be discounted when drafts are accepted which expedites cash flow. Also, exporters can offer extended payment terms if payment is being made through a letter of credit. Also, notification of this letter can be made electronically which shortens the time needed to complete a transaction.
Other forms of B2B trade credit
There are other forms of B2B export financing. One is financing through a documentary credit with bank-to-bank financing. Here, a bank lends funds to the importer's bank through a short loan or interbank agreement.
Bill of exchange
There is also a bill of exchange. The way they work is that exporters make an agreement about the terms of payment on commercial contracts and then grant an importer a credit period. This is documented on a promissory note or on a bill of exchange. B2B credit can also be accessed through a buyer credit. This is an arrangement for financing which is made between a bank and an importer or their local bank. This form of financing may be best for some markets and for transactions that are large or complicated.
B2B Pay on the move
As an exporter, you are wary of delays and losing lucrative opportunities because of not having the means to finance it. Once you have your B2B credit, you can count on B2B Pay to take care of you in regard to international B2B export financial transactions. We will open a virtual account for you that gives you access to 35 European countries. A virtual account will also eliminate paperwork and make transactions secure. Give us a try and you will like our speed and reliability.