Question

1. Discuss the two forms of financing in International Trade: Secured and Unsecured.

2. Discuss the types of risks for doing business in the global markets and how to avoid them.

Answer 1

[ 1.] International trade

It refers to the exchange of the goods and services between the countries. It means the export and import of goods and services.

Types of international trade....

• Bilateral trade
• Multi-lateral trade
• Import trade
• Export trade
• Entrepot trade

https://images.appgoo.gl/rHQXtSBCEQYE599W6

Types of trade finance

• Trade credit
• Cash advances
• Receivables discounting
• Term loans
• Leasing and asset backed finance

1. Trade credit

• Normally the seller requires payment of goods 30 or 60 days post shipment.
• Trade credit, which is probably the easiest and cheapest arrangement is based mainly on trust directly between the buyer and seller.
• When the two parties are less well known to each other, or if the creditworthiness of the buyer is not known, a bank backed bill of exchange can be issued and guaranteed by the buyer's bank.

2. Cash advances

• A cash advance is a payment of funds (unsecured ) to the exporting business prior to the shipment of goods.
• It's often based on trust ;a cash advance is usually favorable and sought by the exporters so that they are able to manufacture or produce goods following an order.

3. Receivables discounting

• Receivables are mainly commercial and financial documents,and new finance houses and marketplaces allows such documents to be sold at discounted prices in return for immediate payment.

4. Term loans

• Longer term debt can be more sustainable sources of funding.
• They are often security or guarantee backed.
• Often in the world of international trade and finance, securing against assets owned by business owners in other countries in more tricky, especially due to different ownership regulations in other jurisdictions.

[ 2.] International business

It defined as the process of focusing on the resources of the of the globe , and objectives of the organization focused on global business opportunities and threats, in order to produce, buy, sell or exchange goods or services globally.

International business challenges

1. Enhanced risk and uncertainties
2. Globalisation
3. Global competition
4. International market challenges
5. Regulatory and tax structure
6. Multiple currencies
7. Globalized consumers
8. High cost and investment

• Dr. A.J.George, Anish Thomas.( 2019 ). INTERNATIONAL BUSINESS AND FINANCE. Prakash publication
• Trade finance global 2020 guide. https://www.tradefinanceglobal.com/trade-finance/types-of-trade-finance/