Import Financing:

What Is Import Finance?

Import finance makes up the credit options which allow international traders to get rid of their cash flow issues. Essentially it helps import traders to bring goods into the country and also helps to fund their business goals.

Based on regional context, it can also be called trade, inventory or stock finance. It is often considered as a financing option that comes in handy to meet immediate capital requirements and is usually provided by a third-party. 

Typically, the need to seek import finance occurs due to the challenges that surround international trade. The funding option thus often serves as a financial cushioning for importers.

Usually, goods like soft commodities, cars, metal, furniture, oil, television, clothing, children’s toys, etc. qualify for import finance. 

Types of Import Finance:

Here are the essential types of import finance you should know about –

• Usance And Standby Letter Of Credit:

When an importer avails a usance Letter of Credit or Deferred Payment Letter of Credit, it helps them to defer payment against a purchase. As a result, the importer or buyer gets more time to manage funds or sell imported goods. On the other hand, when a Standby Letter of Credit is used for a transaction, it provides a guarantee of payment to sellers.

Though it helps to avoid the risk of default, it is treated as a last resort. Traders who take part in export and import of goods frequently often prefer Letter of Credit over other financing options.

• Bank Guarantee:

It serves as a guarantee of a buyer’s creditworthiness and is issued by banks. It protects the concerned party against any loss arising due to the other party’s inability to meet contract terms. It is used by individuals who deal in bidding on infrastructure projects. 

• Asset-Based Facility:

This funding option allows importers to avail loan against assets. Typically, individuals avail this asset-based loan option by securing any of the following –

• • Inventory
  • Equipment
  • Buildings
  • Accounts receivable
  • Other assets in the balance sheet

• Invoice Financing:

With this funding option, one can sell their accounts receivables to raise capital. Financial institutions may provide up to 50-80% of invoice value as loan and help businesses cater to their immediate requirements conveniently. Also, the fund received helps to improve cash flow and maintain working capital of the company successfully.

Based on a business’s requirement and its cash cycle, importers should select a suitable import financing option. KredX provides quality financing solutions like invoice discounting services to help solve immediate cash flow related issues and will help reach the required working capital successfully. 

What Is Required To Avail Import Finance?

Typically, financiers require applicants to submit these to review their loan plea –

It must be noted different financial institutions may ask importers to submit additional documents to back their creditworthiness.

Benefits Of Import Finance:

Challenges like fluctuations in currency value, political and economic turmoil and doubts related to business partner’s repayment capability surround import trade. However, with import finance, such risks become almost irrelevant as the funding option either extends immediate payout or assures it.  

Other most prominent benefits of import finance include –

• They do not affect existing bank facilities as they are financial tools that are not recorded in the balance sheet.
• Importers can expand their business without the need for any equity or private investor.
• It does not accompany the risk of losing a part of business ownership.
• It helps to negotiate terms of trade that are convenient and more effective.
• With the help of import financing, importers can meet the working capital requirement and avoid cash flow issues.
• Most import financing options come with an extended repayment period; this helps importers to choose a tenure that allows them to repay the loan conveniently.

Import Finance Through Invoice Discounting:

Invoice discounting is also referred to as bill discounting and is considered to be a useful import financing solution. Through invoice discounting, importers raise funds via their bills receivable.

Such a funding option offers quick access to funds and comes with excellent terms of repayment. With the help of funds availed, importers can either pay for their imported goods or reinvest the value to keep their business operations actively running. 

However, the sum of money availed through this option depends on businesses’ creditworthiness and the value of invoices. 

Boost your import trade practices by availing our invoice discounting services online from KredX and gain access to funds within 24-72 hours*. As India’s leading integrated cash flow solutions provider, KredX makes sure that you have access to a steady flow of working capital at all times. All you need to do is follow a simple application process online and provide some necessary details. Get in touch with us now to learn more about our services!