International trade finance- 2004

Résumé du document

Entrepreneurs often mention « lack of financing » as the main reason why an interesting transaction was not pursued or why a project could not be completed, why a company could not sustain its growth rate or why it failed. However, there are always two sides to a coin and bankers, lenders and investors will argue that they have the money and the intention to fund businesses, but that their criteria must be satisfied and that financial proposals must substantiate the needs expressed by entrepreneurs.

In a sense the law of offer and demand governs the financing industry as it does most other economic activities. The demand consists of day-to-day business transactions, strategic projects, expanding into foreign markets and other business operating requirements. On the other hand, offer materialises in the form of the various financing programs that are made available by financial institutions (banks, lenders, investors and government agencies), their expectations, and the availability of capital and mostly by their appetite for risk.

Extraits

[...] Political situations take different shapes or forms. Let us remind ourselves of the conflicts in Haiti, in a few African countries, in the Persian Gulf, in Eastern Europe. How about the Mexican peso crisis of the 1990's? Then there are the transitions to democracy or to market economies, emerging economies, developing countries and the enduring regimes in China, Vietnam and Cuba. Nevertheless investment and trade have been substantial in riskier parts of the world over the last decade and will continue to increase. [...]

[...] The exporter must be aware that exercising legal recourse against a foreign buyer in default may prove very time consuming, costly and necessitate up to a few years before any payment is obtained. For modest accounts receivables such a procedure would not be worthwhile undertaking. Some collection agencies can try to recover the sums due to the exporter for a commission. Usually no commission will be charged if the collection agency is not successful ILLUSTRATION OF OPEN ACCOUNT TERMS Figure 54 Open account 1. Contract 2. Credit information 3. Shipment & invoicing 4. [...]

[...] Post-evaluation: the final phase is a Bank assessment of the project, of the results achieved and of its impacts. It is performed after the project has been completed and all funds have been disbursed. The evaluation phase normally requires 6 months to complete MULTILATERAL DEVELOPMENT BANKS Other institutions provide project financing to developing countries, alone or jointly with the World Bank. Four well-known Multilateral Development Banks are: 1 Interamerican Development Bank IBD www.iadb.org The financing of social and economic development program in Latin America and the Caribbean brings with it a vast array of business opportunities for suppliers of goods and services from each of the IDB's 46 member countries. [...]

[...] Leasing is also a smart way to diversify sources of financing and maximize the financing options. A modestly capitalized SME must stretch every dollar to the maximum Methods of payment When external financing is needed, the type as well as the source of financing will be influenced by the terms of payment extended to the buyer and the method of payment. The principal methods of payment are: Payment in advance prepayment Documentary letter of credit Documentary collection Open account Figure 2. [...]

[...] Example: the Canadian dollar is worth 0.6400 $ US. Indirect quotation: the price of a national currency expressed in terms of one unit of a foreign currency. Example: one US dollar costs 1.5630 $ Can. Currency cross rates Figure 19. Currency cross rates Source: Yahoo! Finance, Currency Conversion 1 Spot rates In the spot market delivery of the currency and settlement are made on the same day cash deals, some US dollar transactions the next day normal for US dollar deals or in two days for currencies other than the US dollar at the latest. [...]