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A guide to give you a breakdown of everything you need to know about import and export financing and why Comerica Bank can be your trade financing facilitator.

A Quick Guide to Import and Export Financing

November 2, 2018
By Comerica Bank

The world's economy is connected through global trade accords like the North American Free Trade Agreement, the Transatlantic Trade and Investment Partnership and the litany of other agreements with foreign countries. Growth is made possible through the open exchange of international commerce, taking full advantage of human ingenuity to benefit societies.

While the cooperation of governments has allowed for access in the near and far reaches of the globe, actually tapping into these international markets requires importing and exporting services. Commercial ports are hotbeds of activity, with the busiest in California, Texas and South Carolina.

But frenetic ports would be veritable ghost towns without the financing to get equipment, products, supplies and raw materials from here to there.

That's where import and export financing comes into play. This quick guide will give you a breakdown of everything you need to know about import and export financing and why Comerica Bank can be your trade financing facilitator.

What are import and export trade financing?

Import and export financing, as their titles imply, pay for the accompanying expenses associated with receiving and shipping goods to and from companies in other parts of the world. From tariffs to freight rates, duties and fees, capital requirements run the gamut. Import and export financing provide the funding advances so the exchanging of goods can transpire.

How does it work?

There are at least three parties involved in the trade flow process: the customer receiving the goods (importer); the company selling (exporter); and the lending institution that's financing the operation. Once a sales agreement is reached between the two parties that are buying and selling, the financial institution makes the funds available for the transaction to proceed. Where the funds go - and how they're delivered - depends upon the nature of the loan. For export financing, where the exporter's bank is involved, the lender sends the appropriate funds to use as a deferred payment. For import financing, it's the importer's bank that pays the exporter, and the importer repays the lending institution the principal amount plus interest.

Countries may not always have the same monetary system, so the lender ensures that the funds align with the local currency.

Import and export financing fund the transaction itself, but financing can also be made available before it transpires. With pre-import financing, the lender provides the importer with a working capital loan, and approval is based on the borrower's credit history. With pre-export financing, it's the seller that's seeking an advance, so it can produce goods to sell, although the money may be used for other purposes, such as the transportation of goods and warehousing. Approval of the loan is measured both on credit history and a solid track record of buyers.

How Comerica Bank can help

Import and export financing isn't just an option; it's a necessity to keep up with today's increasingly transnational and transcontinental economy. That's why the ability to obtain competitive financing has never been more important for export/import services. It can make all the difference in the world when international trade is pivotal to cash flow.

Comerica Bank can be your financing facilitator. As the Leading Bank for Business1, with more than 30 years in the foreign exchange market, Comerica Bank brings businesses together on opposite sides of the globe. We're the international partner that helps you get results.

1Comerica ranks first nationally among the top 25 U.S. financial holding companies, based on commercial and industrial loans outstanding as a percentage of assets, as of June 30, 2018. Data provided by S&P Global Market Intelligence.
This information is provided for general awareness purposes only and is not intended to be relied upon as legal or compliance advice for your business.