How to execute a business transaction
Understand how trade finance can support your cross-border transactions and navigate local laws and regulations.
After exploring ways to join the global trade game and preparing for contract negotiations, you are eager to find the best possible solution to access the financing you need to expand to new markets and manage international transactions.
How can trade finance support your business?
Trade finance includes financial instruments such as loans, letters of credit, guarantees and supply chain finance, which can help your business manage the risks and cash flow challenges associated with cross-border transactions.
Finance instruments can help you by providing financing, allowing you to focus on your production expertise Some tools can also provide cover from risks related counterparties, currencies and geopolitical developments which can enable you to scale up and operate in new markets.
How to get started:
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Choose the right trade finance
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Obtain a globally accredited ICC certificate in trade finance
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Prepare export documents
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Navigate laws and regulations
Step 1: Choose the right trade finance
When trading goods and services, risks regarding financing and payment modalities play a major role and need to be managed with care. Trade finance can provide useful financial instruments and products for importers and experts to facilitate international trade and match your needs with those of your business partner.
What is the right trade finance instrument for you?
As a business leader, make sure you first assess your cash flow needs, trade cycle and risk exposure to determine which solution or product is right for you.
A letter of credit is a guarantee from a bank that ensures a seller receives payment from a buyer, provided agreed-upon terms are met. This reduces payment risk for both buyers and sellers, particularly when trading internationally with unfamiliar partners.
When do I need letters of credit?
Consider letters of credit when trading with new overseas partners or when assurance of payment is crucial.
How to apply for trade finance?
Many institutions provide trade finance solutions, including commercial banks, development banks, fintechs, factoring companies, trade finance specialists and export agencies, among others.
Regardless of your preferred trade finance provider, you will have to:
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Gain access to cross-border payment capabilities to engage in trade.
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Prepare business registration documents to prove your legal status, for which a minimum of three years of financial performance is required.
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Select a finance provider who can provide the products required to achieve your trade finance needs.
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Open a cash account with the provider; as the relationship builds, get a credit line approved and open an account with the provider.
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Sign a trade agreement/contract with a supplier/buyer.
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Consolidate key documentation
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Complete an application form with all the details of the transaction, and upload all relevant documents for the financier’s due diligence process.
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Wait for results.
Step 2: Prepare export documents
When exporting your goods, the customs authorities from the importing country will require several documents from you, including your export invoice, import or export declarations, a bill of lading or airway bill etc. Very frequently, you or your company’s agent will be asked to present a Certificate of Origin.
Shaping the future of Certificates of Origin
In recent years, more and more Free Trade Agreements have been established as a means to lower trade barriers for frequent trade routes. Free Trade Agreements often enable exporters to self-declare the origin of the exported products without the need for a formal Certificate of Origin. This comes with its own set of complexities, calling for a tool to make the process simpler and more secure for you – ICC Genesis.
Step 3: Navigate laws and regulations
Much like domestic trade, international transactions must comply with their own set of rules. As you move products and services from one market to another, you will first have to consider international sources of law and regulation. You will also have to follow regional or national rules, consisting of laws and regulations that govern the entry and circulation of goods and services, as well as business practices in a specific market.