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