Free Online Course in International BusinessTask 7Identify and arrange shortterm (up to 180 days) pre and/or postshipment finance for a seller to ensure lowest cost financing at acceptable levels of risk.IntroductionThis area of financing provides many options for an exporter and in some cases desirable financing options for an importer. It is important to remember that all options carry risk and the greater the risk the higher the cost. When evaluating risk, the associated costs must be a factor in the cost equation. The financing tools that have been presented in other sections merge at this point into potential financing options. These options include financing from vendors (suppliers), banks, insurance (making receivables eligible for financing), standby letters of credit (to provide credit terms from a seller), commercial letters of credit (under acceptance financing), government programs (pre and postshipment financing options) and documentary collections (under extended payment terms with an accepted draft). These options are tied to inventory and accounts receivable which are short term in nature and turn over within a six month period, or in some cases up to one year. Careful examination of these options is necessary to select the right option for the right price and risk level. This module will introduce you to the forms and functions of shortterm financing: credit insurance, governmentsupported finance, discounting, timedraft letters of credit, and the Export Working Capital Program. If you are not familiar with the basic accounting terminology covered in this module (accounts receivable, debit, credit) you need to review a basic accounting book to familiarize yourself with the terms. You will find reference to letters of credit and a variety of other payment terms covered in detail in Task 4.
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