What is trade finance

Trade finance is a form of bank specialization with respect to financing international trading transactions. In order to effectively work in this industry, it is important to have an experienced team of professionals who have dealt with trade finance as it is a high risk business area.

Trade Finance explained

In order to provide trade finance services, it is important to acquire a banking license in the jurisdiction you wish to establish your bank. It does not matter which type of banking license is acquired as both class A and class B allow holders to deposit, lend and send wire transfers. However, the customers the bank wishes to cater to are determined by the bank license obtained.

Additionally, it is required that the bank holds a SWIFT membership and has a correspondent bank. This will enable the banking institution to offer trade finance and engage with the customers who require this service. After these three requirements have been fulfilled, the bank can offer trade finance services.

Trade finance banks offer a range of services of which issuing Letter of Credit for the purchase of goods is the most widely used. In addition to this service, they also offer other services including shipping guarantees, import finance, invoice finance and assisting exporters to get loans.