Finance for Exporters
Finance for exporters and importers is fundamental to their business. For example, an exporter will generally need to make payments for the purchase of raw materials, wages, and other inputs to manufacture goods, etc., prior to receiving payment from the buyer. Similarly, an importer, who may be a distributor/wholesaler or manufacturer, will be required to make payment to their suppliers prior to receipt of payment from the ultimate buyers. Accordingly, both exporters and importers have a need for finance to meet this mismatch in cash flows.
Exporters have two distinct finance periods that are differentiated by the shipment. These are the finance required to prepare the goods for shipment that is known as Preshipment. The second period is known as Postshipment and covers the period following shipment of the goods, including any terms extended to the buyer.
Exporters in seeking to balance out the mismatch in cash flows, will use a mix of two broad approaches. The first of these is to seek finance through negotiation of trading terms with suppliers and buyers that will more closely match the timing of payments against expected receipts. The second is to seek financing from financial institutions.
Financing Methods
Financial institutions have a range of finance methods available to assist buyers with their cashflow requirements including the following:
Source: Trade Guide, Commonwealth Bank of Australia, 1998, pg 45.
Links are available to several informative Websites at http://uwadmnweb.uwyo.edu/SBDC/ and "The Currency Site" at www.oanda.com/ which includes a currency calculator, historical rate tables, current rates and forecasts for world currencies.
Top of Page