Trade finance is an important part of the business. It offers various aspects of managing finances for the company. Trade finance helps to generate, manage and establish various finance practices like working capital, factoring solutions, banking solutions, loans, guarantees, discounting, etc.
Various trade finance companies help to provide credit finance, export finance, credit protection, invoice collection services, etc. Trade finance companies help to reduce marketing cost and increase your trade profitability. They also help in increasing the sales by promoting the products, services or the website around the world. Trade finance companies also help in broadcasting the trade leads, generate new business and promote the company to new business groups or business ventures. Trade finance companies help in eliminating most of the commercial and political risk normally retained by the company or any small or medium business owner. These trade finance companies also provide 100% financing solutions. Some of these companies or agencies are factoring agencies also that help in facilitating international trade through factoring and other related trade finance techniques.
Export oriented trade finance companies provide finance support system for enhancing cash flow, reducing finance costs. Export trade finance companies or agencies also provide information and support for export working capital, Export Import Banks, financing, loans, loan forms, guarantees and forfaiting. It is important to know about some of the export trade financing companies, agencies, or financial institutions like AFIA, Export Express, Factors chain international, etc. Some agencies with their special trade finance programs and techniques help small and medium business owners to find needed capital to succeed. They also help in pre-order financing of labor, materials, goods, machinery, financing of receivables, issuing letters of credit, etc.
Apart from companies and agencies there are several government organizations that assist companies with their export venture. These federal governmental organizations offer services that range from export loan guarantees to loan assistance. They also serve as specialized associations that offer advice and counsel to interested small and medium business owners. Moreover, they also organize and provide seminars, lectures, convocations and publications on topical areas of trade finance techniques. They also server as a medium to exchange information between organizations, companies, agencies, that indulge in trade finance. Professional trade finance companies and institutions seek to promote good and moral trade practices amongst the trading parties.
Trade financing be it for the local market or the international market for exports, begins from the first stop at the banks. It is important to identify the source that provide trade finance or risk mitigation. Factoring, forfaiting, loans, bank guarantees, letters of credit, export financing are various trade finance practices.
Factoring allows the business owner to calculate the present value of future amount due or sale of a firm accounts receivable to a financial institution known as a factor. Invoice factoring helps the small and medium business owners to obtain immediate cash required for business without owning and debt or transferring business equity. These business owners sell their invoices in order to receive money today.
Forfaiting is a practice of trade finance, which is used as an alternative to the export credit or insurance cover. It allows exporters to obtain cash and eliminate their risks by selling their receivables on a ‘without recourse’ basis. These trade finance practice act as resources of fund management, credit management, loan elimination and increasing profitability by cutting administration and marketing costs along with the overheads.
Archive for November, 2011
The Benefits of Cash Flow and Working Capital Management
Saturday, November 26th, 2011Business Finance – Five Options For Start Ups
Saturday, November 26th, 2011
When starting a company it can be extremely difficult to find the business finance that will allow you to start operations and begin trading. This is why it is vitally important to understand the different business finance options available to start ups. Hopefully this article will be able to put forward five of the best funding options.
The first and most obvious business finance option is to use your own money. For those blessed with a large amount of savings this can be a good option, even taking a second mortgage to fund a business can be worthwhile. The main advantage of this form of finance is that it gives you control over all of the financial interests in the business, the wants and needs of investors are not an issue. However, care should be taken, by risking your own money you may have o sell your house, or may even end up bankrupt if the business fails.
Another option for those trying to find business finance is to ask friends and family for start up capital. Normally friends and relatives will be able to lend you money along better terms than a bank. It is worth remembering however that being indebted to friends or family can be troublesome, placing tension on relationships and in some cases can even ruin friendships. When borrowing from friends and family, be sure to have a written agreement, by doing this the chances of any misunderstandings are reduced greatly.
One of the most frequently used options for those starting a company is to visit their bank in order to obtain business finance. This may take the form of an overdraft, which can be beneficial due to its flexibility. However, if buying over an extended period of time a loan is likely to be a far more suitable option, due to the lower rates of interest.
There are a number of different small firms that are able to provide business finance to companies. Some of these firms work within a government lending structure and as such secure any loans given to government guarantees rather than personal possessions. With a little research it can be possible to find this form of government assisted loan, which reduces risk on your part.
As well as loans, another business finance option is to find external investors who may be interested in buying shares. Typically they will put their money into the company and will only expect returns once the operation begins to bear fruit. One of the major advantages of this can be the free expertise brought to the table by investors; a downside however is the loss of control over the company’s direction and the need to share any profits.
These five forms of business finance represent the most commonly utilised options for those who are starting a business. It is only through careful consideration and a process of detailed research that the correct option can be found. If the right decision is made however it should be possible to create a solid financial platform for your business.
Capital Management Tactics in Corporate Finance
Saturday, November 26th, 2011
Capital is essential to carry out any sort of corporate objective. Capital can come from any source. It is mainly made up of debt and equity. Debt is generally referred to the burrowed money from financial institutes on the other hand equity is the shareholders’ money known as equity capital.
Debt holders have no share in the profit but are concerned about the return of burrowed money with interest. If the debt raises the capital rise as a result of this the rate of interest rises along with risk of capital. Now let us discuss different tactics that can help in proper management of corporate finance.
Ways to Corporate Finance Management
The corporate finance should have the right mix of debt and equity which is popularly know as capital structure. But before formulating the strategy of proper finance management it is important to identify the factors on which the business risk mainly depended.
• Instable demand can increase the business risk
• Varying sale price
• Difference in input cost and skills required to control price successfully in the market
• Capital required to carry out normal functioning along with rising input cost and lower sale price
• Fall in the demand of product without fall in high fixed cost
Apart from these new cost effective production ideas, fluctuating exchange rate etc can also increase the business risk. The business risk will be higher if the fixed cost is high. Along with that higher leverage will increase the business risk. For proper management it is important to find out lowest investment on fixed asset with lowest operational cost.
Lower debt finance should be used while to avoid facing threat of bankruptcy. The use of debt finance must be based on earning in terms of present value. It is important to analyze the past and present record of the firm with accurate finance resources. The capital structure must focus on market values. With the help of an effective capital structure it is possible to maximize the market value of the firm. The credibility of the firm mainly depends on the market value. With proper capital management it is possible to use the resources effectively to yield better return on investment.