Export finance is a process of funding exporters to facilitate their business in the global market. It is a cash flow solution for exporters to cater to their production and other global transaction requirements, including working capital. Export finance is a short-term funding agreement available to suppliers (exporters) trading with overseas buyers (importers) . It allows suppliers to access working capital while they wait for payment from buyers. Export finance services help exporters mitigate their risk of default of payment on the hands of importers as well as fill the gap between manufacturers and overseas suppliers.
Export finance can be provided through a variety of providers, ranging from traditional lenders like banks to alternative lenders like invoice factoring companies. The application and approval processes will depend on the lender. Applying for export finance through a bank is typically more complex and often includes numerous background and due diligence checks. However, for larger exporters supplying goods at high volumes, bank export finance may be more convenient because banks can often finance higher-volume orders and offer lower interest rates and fees for those services.
Export finance can take different forms, including pre-shipment finance, post-shipment finance, and export factoring. Pre-shipment finance is provided to exporters for the purchase of raw materials and processing them into finished products. Post-shipment finance is provided after the shipment of products or goods. Export factoring is a financial transaction where a company sells its accounts receivable to a third party at a discount.
In summary, export finance is a funding solution for exporters to facilitate their business in the global market. It allows suppliers to access working capital while they wait for payment from buyers. Export finance can be provided through a variety of providers, and it can take different forms, including pre-shipment finance, post-shipment finance, and export factoring.
