Amidst the worldwide slowdown in trade due to the global pandemic, businesses in all sectors have been forced to reduce their risk exposure. This is especially true for international trade. However, one way to survive the current economic turmoil is to use financial instruments for your own protection and success. Particularly for trade finance, there are many options available, even in emerging and frontier economies, through trade finance providers like Euro Exim Bank.
Major Strengths of Using Trade Finance
When two parties from different countries interact with each other, crises of trust can often emerge. This lack of surety of one another can often be cause for business opportunities to be left on the table. However, using trade finance instruments such as Letters of Credit can help to build trust and lubricate international trade transactions.
Especially for SME’s operating in emerging and frontier markets, using a respected trade finance provider as an intermediary can significantly add to your credibility and the level of trust you will enjoy. At the same time, your business will be able to reduce its risk exposure and leverage its operating capabilities.
What Trade Finance Instruments are Available?
There are many instruments and mechanisms available for SMEs and larger businesses. These include Letters of Credit (LCs), which are the most trusted and present the least risk to both exporter and importer. Along with this, instruments such as Letters of Guarantee (LGs), irrevocable Reimbursement Undertakings (IRUs), escrow services, commodity trade finance, factoring and other instruments are also available.
While your choice of instrument is important, it is also necessary to choose a reputed international bank, such as Euro Exim Bank as your trade finance partner. This is especially true for SMEs in emerging and frontier markets, as choosing an international bank will likely give you significantly more financial freedom of movement and potentially more accessible services.
Trade Finance Set for Growth
In the present economic climate, the global trade finance industry is projected to grow significantly. As the risk of default, non-payment and other risks increase against the backdrop of the global pandemic, more businesses will seek out solutions to mitigate risk. One major focus area for trade finance providers going forward should be increased reliance on modern alternative settlement mechanisms and data-sharing technologies, powered by blockchain. At Euro Exim Bank we have been early adopters of blockchain-backed technology, continuously making global payments more accessible and affordable for our customers.
