Trade finance helps mitigate risks for both buyers and sellers in international trade, ensuring smooth transactions, bridging funding gaps, and improving cash flow.

Some common trade finance instruments include: Letter of Credit (LC) – A bank guarantee ensuring payment to the seller upon meeting specific conditions. Bank Guarantee (BG) – A bank promise to cover losses if a party fails to fulfill its obligations. Factoring & Invoice Discounting – Selling accounts receivable for immediate cash. Export Credit & Insurance – Financial support for exporters against payment risks. Supply Chain Finance – Financing solutions to optimize working capital in trade transactions.

An LC is a financial instrument issued by a bank on behalf of an importer to guarantee payment to the exporter, provided certain conditions in the trade contract are met.

- Revocable & Irrevocable LC – Irrevocable LCs cannot be changed without all parties’ consent. - Confirmed LC – Another bank guarantees the LC in addition to the issuing bank. - Sight LC & Usance LC – Sight LC requires immediate payment, while Usance LC allows deferred payment. - Standby LC – A backup payment guarantee in case of non-performance.

A bank guarantee is a financial promise issued by a bank ensuring that if a buyer defaults on a payment, the bank will cover the amount to the seller.

Factoring allows businesses to sell their receivables (invoices) to a financial institution (factor) at a discount for immediate cash.

Trade credit is an agreement where a buyer purchases goods or services on credit and pays later, often with agreed payment terms like 30, 60, or 90 days

Export finance provides funding to exporters to help them fulfill international trade orders while managing the risk of non-payment from buyers.

Trade finance involves risks such as: - Credit Risk – Risk of non-payment by the buyer. - Currency Risk – Fluctuations in exchange rates. - Political Risk – Trade restrictions or policy changes. - Operational Risk – Logistical issues in shipping and delivery.