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Find out how you can better recognise risks in order to reduce your exposure, optimise your international trade transactions through smart financing and find a payment solution that suits both your and your supplier's requirements.

International trade adds to or increases some risks compared to domestic trade; we ensure that you know the risks in order to eliminate or reduce them.

These are some of the additional risks you need to know of and to manage:

  • Customer risk or commercial risk is not only the risk that the buyer is not financially able to pay as agreed but can also include his will to pay as agreed.
  • Country risk or political risk includes for instance the risk of war, civil riots, acts of God and changes in trade regulations, etc.
  • Foreign exchange risk arises when you invoice in a currency in which you do not have payments and consequently are forced to sell the incoming currency at the time of payment.
  • Other risks could include the transportation of the goods and/or interest rate fluctuations.

Get the optimal benefit of your international trade transactions. Using collections (direct collections) or documentary credits for the payment opens a range of new possibilities for you and the buyer to arrange and handle the financing in an efficient and secure way.

The same applies if you offer your buyer a guarantee such as an advance payment guarantee. Financing of larger transactions or projects is normally handled as structured financing or as project financing. Using the flexibility of Collections, Documentary Credits and Guarantees, you will have a vast number of possible solutions to the financing needs of your international trade.

We find a solution that suits both your and the supplier's requirements. As a supplier you would probably prefer to receive the payment before you make the delivery while the buyer would probably ask for the goods before payment is made. By using the right payment method and structuring it the right way, you can always find a solution that meets the requirements of both parties.

These are the most common standard payment methods in international trade:

  • Clean payment
  • Collection (an alternative to regular collections)
  • Documentary Credit

Combined with a guarantee, you have a large variety of options in order to achieve the solution needed for your international trade.

Increased financial control and focus on working capital have resulted in an increased focus on working capital. As a consequence of the financial turmoil during the past years we have noticed increased demand for financing. Offering financing is often a parameter that determines who will win a sales contract and is seen to be a condition for a purchase.

Financing may be provided as supplier's or buyer's credit. Supplier's credit is when the exporter extends the credit to its customer while buyer's credit is normally obtained by the buyer itself or through its local bank.

Structured Trade Finance is a way of providing solutions that will help you become even more competitive. Structured Trade Finance is preferably used for substantial transactions that encompass long production periods and credit periods from 180 days up to 5 years. It is recommended that you contact Nordea at an early stage to discuss which may be preferred.

Whether you need short term discounting of receivables such as bills of discount, Promissory Notes, Export Letters of Credit or receivables secured by Standby Letter of Credit or other means of security such as an ECA (Export Credit Agency) guarantee, we urge you to contact us early on in order to find the most appropriate solution.

Export finance helps you to remove short or medium term receivables from your balance sheet, thereby reducing both credit and currency risks, improving liquidity, and simultaneously providing your customers with their desired payment terms. The majority of our products do not involve any element of recourse to the exporter.

Our global network and long standing experience help us understand the risks and opportunities related to export finance, and our competitive pricing and prompt service will save you time and money.

Your benefits

  • You get paid directly in connection with delivery or soon after.
  • Your transaction can be financed externally.
  • High degree of flexibility in structuring the financing including instance disbursement, repayment and risk management.

Note: As this is a credit service, it will require the credit approval of Nordea. 

Like a DC and a bank guarantee, a standby letter of credit is a very flexible instrument for all types of business. It can cover anything from an ordinary guarantee commitment to a more sophisticated financial instrument. It is normally used in order to secure the fulfilment of contractual obligations such as payments.

When you and the buyer have agreed on the contract terms, you also need to define which of the terms are to be secured by a Standby Letter of Credit. If you have agreed to open a Standby Letter of Credit, the buyer has to contact his bank and request the issuance of the Credit.

The Standby Letter of Credit comes in to practice when the buyer fails to fulfil his payment obligations, or to perform a job or meet some other commitment called for and stated in the commercial contract. The seller can then, on demand, present the stipulated documents stated in the Credit, and the issuing bank is obligated to make the payment, provided all terms and conditions of the credit complies with credit.

  • You secure compensation for non-fulfilment of any important obligations
  • You secure payment
  • You can obtain advance payment
  • You can offer credit and/or obtain financing
  • You only need to present documents to the bank when your buyer has failed to fulfil his obligations, making it easier for you to administrate.

Shortcuts

FAQ

Yes this is possible, but all amendments have to be approved by the applicant and issuing bank. When an LC has expired it means that the issuing bank has no more liability towards the exporter, and if the beneficiary ships goods he does it at his own risk and peril. If the exporter requires the LC to be extended or amended he must contact the applicant who in turn must apply for an amendment at the bank (issuing bank).
It is a method which means that a first beneficiary (often a middleman) transfers his rights to a second beneficiary (normally the producer or ultimate seller). According to ICC rules, article 38(b), an LC can only be transferred if the issuing bank expressly designates it as transferable. Only the nominated bank or a bank authorized by the issuing bank may transfer the DC.
As per the agreed terms between buyer and seller, the period of credit is decided in the LC. Based on that period of credit, the time to effect payment by the opening bank (buyer's bank) is determined.
Yes, if you have presented correct documents and if Nordea has confirmed the LC you can be sure to receive payment at the time of maturity. If the LC is without confirmation you will receive funds when the foreign bank has effected payment.
It is the bank designated in the LC to reimburse the nominated bank. Thus it is the bank where the issuing bank maintains an account for the designated currency. The nominated bank will claim funds from the reimbursing bank after having accepted the documents.
If the documents are clean (without discrepancies), the exporter has the risk on the issuing bank. If the documents are discrepant, the seller has the risk on the buyer who has the option to waive the discrepancies or refuse documents.
The buyer might refuse to pay, and you may have to sell the goods to another buyer. If the goods, for example, are custom made it can be difficult to find a new buyer.
If the LC has expired and if the documents are discrepant and not accepted by the applicant.
If the LC does not state the amount of insurance, the insurance document must cover at least 110% of the invoice amount (CIF/CIP value).
The idea with the Documentary Collection is that the goods remain in your control until the buyer has paid and received the documents. To achieve this, remember to put the collecting bank (buyer's bank) as consignee of the goods in the transport documents.
An Aval is a joint commitment by the principal debtor and a third party (normally a financial institution) to make payment of an obligation in favour of the beneficiary. The third party commits itself for the full credit amount in the event that the principal debtor does not fulfill his obligation by the due date.
Transhipment is the act of taking cargo from one kind of transport to another during the goods transportation route. Partial shipment is when you split up an order into several deliveries.

Get in touch 

For more information about how we can support your business contact your Nordea adviser. 

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