Free Online Course in International BusinessOther Medium- and Long-Term Financing ProgramsLine of Credit AllocationsInternational banks with overseas subsidiaries may finance a subsidiary of a multinational company by utilizing the credit facility of the parent company as collateral for the foreign subsidiary. The international bank will transfer an exposure limit to its foreign subsidiary in order to accommodate the credit facility. This process is difficult and assumes the bank of the parent company has a subsidiary branch in the country where the financing is required.ForfaitingForfaiting is defined as the discounting of medium term promissory notes or drafts issued by a foreign buyer. Banks forfait larger transactions over a longer period of time backed by maturing promissory notes. Banks also prefer that the drafts or promissory notes be avalized by the issuing bank, thus providing a guarantee from the avalizing bank. The benefit to the importer is the receipt of a discounted cash payment for the sale with the bank assuming responsibility for the collection of the promissory notes or drafts. Forfaiting is mainly used to finance equipment and relates to specific transactions.Multilateral OrganizationsMultilateralism is a term defined by Webster's Collegiate Dictionary (11th edition) as "involving or participated in by more than two nations or parties (such as agreements)." Most international organizations, such as the United Nations and the World Trade Organization, are multilateral in nature.Multilateral Development BanksMultilateral development banks were established to stimulate and foster international economic activity by financing strategic projects around the world. Some examples include:• the World Bank • the Inter American Development Bank • the Asian Development Bank • the Caribbean Development Bank • the African Development Bank • the European Bank for Reconstruction and Development All have a specific regional focus with the exception of the World Bank. The banks operate with funds contributed by the member countries and distribute the funds for specific developmental projects. Each year project priorities and funding programs are established by the banks. Once established, companies and/or other government agencies are encouraged to submit proposals for funding. United Nations Development ProgramThe United Nations Development Program (UNDP) is affiliated with the United Nations (UN) to provide multilateral development. One hundred thirty countries are contributors to the program which provides a network of specialized international agencies that give technical assistance and financing support to underdeveloped countries. A developing country will review offers or bids from companies interested in providing the services needed and award contracts accordingly with funding the UNDP. The suppliers must keep in close contact with the UNDP and its affiliated executing agencies in order to know what contracts are coming up for bid.SummaryRemember that financing organizations change their programs regularly. As an international manager, you should be aware of the organizations that offer medium and long term financing. Most importantly, you must know how to contact them to identify their current programs. Knowing that this type of financing is available for international transactions will allow you to negotiate from a strong position and encourage the companies involved to engage in international transactions.ResourcesExport Import Bank of the United States www.exim.gov (click on U.S. Exporters)FITT Skills International Trade Finance Participants Manual, Forum for International Trade Training (FITT) The Global Entrepreneur, James Foley, 2nd Edition, Jamric Press, 2004.
|
About Us | Terms of Use | Contact Us | Partner with Us | Press Release | Sitemap | Disclaimer | Privacy Policy
©1999-2011 OpenLearningWorld . com - All Rights Reserved