Types Of Trade Finance Options UAE Businesses Must Be Aware Of
Businesses that trade internationally find it critical to avail of corporate finance services in Dubai to help mitigate the key risks involved. Even if you have a confirmed order for products, banks may still be reluctant to provide a loan for such types of transactions. Businesses in such a situation resort to trade finance companies in Dubai.
Traders often apply for trade financing in the UAE when they have an order that is bigger than their financial capabilities. To fulfil such a large order, importers, exporters, contractors, developers, and manufacturers avail of various types of trade finance facilities in Dubai. Given below is a list of various types of trade finance facilities traders opt to meet their business requirements:
Letters of Credit
Banks issue a documentary Letter of Credit (LC) to traders as an irrevocable undertaking, which is deemed the most secure banking instrument available for businesses. In an LC arrangement, banks agree to pay the beneficiary provided all the documents are provided and the trader complies with all the terms and conditions.
LCs can be defined as a financial agreement between a bank, a bank’s customer and a beneficiary. Importers can use an LC to ensure that their company only pays for goods after the supplier provides evidence that the goods have been shipped. Exporters can use LCs as insurance in case the buyer fails to pay for the goods they shipped.
A trust receipt is a written legal document that states that the bank will provide goods to the customer. The customer has to pay back the money to the bank after selling the goods within a specific time limit. However, the bank will retain the title to the goods and will repossess it if the buyer fails to abide by the terms agreed upon in the trust receipt. Trade financing in Dubai by way of trust receipts is more beneficial for traders who import raw or semi-finished goods. Such importers require materials for their manufacturing process but they will receive funds only after selling the finished goods in the market. Traders facing such types of fund requirements can contact the providers of trade finance services in Dubai.
Bank guarantees become relevant when two parties are obliged to perform some duties to complete a transaction. The bank guarantee guarantees the payment of a sum of money to the beneficiary. However, the bank will pay the amount only when the opposing party fails to meet the obligations laid out in the contract. The bank guarantee insures a buyer or seller from loss or damage arising from the non-performance of the other party in the contract. If one party fails to perform his obligations, the other can invoke the bank guarantee by filing a claim with a lender and receiving the guaranteed amount.
Overdraft facilities are provided by banks that enable you to withdraw more money than what you have in your account. Companies generally apply for overdraft facilities in Dubai when they are forced to make payments from their current account, exceeding the available balance. Bank overdrafts can be obtained over a fixed time or can be availed as a rolling facility without an end date. Overdraft facilities are best suited for companies that experience fluctuations in working capital. Approach the best trade finance providers in Dubai to easily obtain a bank overdraft facility.
Why Traders Should Avail Trade Finance Services in Dubai, UAE
Corporate finance services in Dubai, especially trade financing, foster business growth by helping traders secure the required funds to purchase goods and stock. Availing of trade finance services in Dubai helps the traders to offer competitive terms to suppliers as well as customers. Trade financing in Dubai is essential for traders to minimise the payment gaps in their trade cycle as well as strengthen supply chain relationships and growth.
Consult with the Best Corporate Finance Companies in Dubai, UAE
Trade finance services in Dubai help traders gain critical business benefits such as the provision of competitive prices, securing working capital etc. However, you need to select reliable trade financing companies in Dubai such as Jitendra Chartered Accountants (JCA) to access the benefits of corporate finance services.
Being one of the leading providers of corporate finance services in Dubai, JCA can help the trading companies to organize & file documents, pitch to the banks, and liaise and negotiate the best possible competitive terms with the banks. JCA’s experience in the UAE marketplace delivers a robust solution no matter how big or complex the deal is.