Getting financing for trading is very important especially if it is being done to cater for international trade. For instance, Dubai is a country that is well known as an exporter of oil thus their government must have trade finance policies that are very effective. Domestic transactions also need to be financed but not as much as international ones. Some reasons why this funding is important have been listed below.
For a venture to do well, the fixed costs should always be satisfied regardless of state of the firm. Examples of these costs are employee expenses, acquisition of inputs and catalogs. Many trades usually need external revenue even more than internal ones to pay for these expenses. If the fixed expenses are not dealt with in time, a venture is likely to collapse.
David Chor, an economist says that trading internationally makes a firm incur more costs than trading domestically. This is as a result of the extra expenditures that are the reason behind the need for external finances. For instance in Dubai, there are many firms that export oil thus they need this financing. For instance they need money to conduct researches about the new oil markets they can venture into.
International transactions also make a firm to undergo some extra costs as a result of shipping duties and also transportation insurance. Making a transaction across a border is likely to take a longer period of time than local transactions which calls for extra working hours for the workers thus more resources spent on their wages. All these things are needed before the income is collected thus the external funds help a lot.
For this reasons, the government of Dubai and the financial institutions have developed this so called finance. It is very different from trading credit as the credit refers to an agreement between the importers and the exporters to take goods and pay on a later date. They may be described as the financial instruments that are created to favor the exporters.
The total percentages of the entire world international economies that depend on these reserves for survival actually surpass ninety. It is hence significant that these strategies are supported for they provide for the economy of whole world. They provide for both the perils that are associated with international trades like currency rate variations and the working money that is required before profits are earned.
Different firms can rely on two types of instruments for trade financing depending on the type of business they are involved in. They are bill validation and documentary credit. Documentary credit involves a commitment by a particular financial institution to pay an exporter on behalf of the importer if they both agree with the terms and conditions set.
Bill validation alternatively is dissimilar as it fails to permit the buyer to spend their resources on other issues for a while before they can make payments to the sellers. This instrument only assures payment for the products taken by the buyer if he does not pay.
For a venture to do well, the fixed costs should always be satisfied regardless of state of the firm. Examples of these costs are employee expenses, acquisition of inputs and catalogs. Many trades usually need external revenue even more than internal ones to pay for these expenses. If the fixed expenses are not dealt with in time, a venture is likely to collapse.
David Chor, an economist says that trading internationally makes a firm incur more costs than trading domestically. This is as a result of the extra expenditures that are the reason behind the need for external finances. For instance in Dubai, there are many firms that export oil thus they need this financing. For instance they need money to conduct researches about the new oil markets they can venture into.
International transactions also make a firm to undergo some extra costs as a result of shipping duties and also transportation insurance. Making a transaction across a border is likely to take a longer period of time than local transactions which calls for extra working hours for the workers thus more resources spent on their wages. All these things are needed before the income is collected thus the external funds help a lot.
For this reasons, the government of Dubai and the financial institutions have developed this so called finance. It is very different from trading credit as the credit refers to an agreement between the importers and the exporters to take goods and pay on a later date. They may be described as the financial instruments that are created to favor the exporters.
The total percentages of the entire world international economies that depend on these reserves for survival actually surpass ninety. It is hence significant that these strategies are supported for they provide for the economy of whole world. They provide for both the perils that are associated with international trades like currency rate variations and the working money that is required before profits are earned.
Different firms can rely on two types of instruments for trade financing depending on the type of business they are involved in. They are bill validation and documentary credit. Documentary credit involves a commitment by a particular financial institution to pay an exporter on behalf of the importer if they both agree with the terms and conditions set.
Bill validation alternatively is dissimilar as it fails to permit the buyer to spend their resources on other issues for a while before they can make payments to the sellers. This instrument only assures payment for the products taken by the buyer if he does not pay.
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