Import financing
Import financing helps businesses that need to purchase goods from overseas suppliers but don’t have the immediate cash to pay for them. It allows them to finance the import transaction through a financial institution.
How it works in detail:
• Step 1
The importing business places an order with an overseas supplier. The supplier ships the goods and expects payment.
• Step 2
To avoid paying upfront, the business approaches a financial institution for import financing. The financier can offer various instruments such as a letter of credit or a loan.
• Step 3
The financial institution makes the payment to the overseas supplier on behalf of the business.
• Step 4
The importing business receives the goods and sells them locally. Once the goods are sold, the business repays the financial institution along with any interest or fees associated with the financing.
This structure allows the business to complete the import transaction without depleting its cash reserves.