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Trade Finance Methods

Introduction
This report will review the main trade finance methods and how they affect function legally and practically. The main document used in world trade is the letter of credit and this will reviewed in dept together with the doctrine of strict compliance and autonomy.
Finance Methods
To make trade possible there is a need for capital, which can be used to pay for the goods bought. The capital can come from several sources depending on the scope of the trade. If it is trade of low cost items in small values, it is possible to get credit in a local bank. The complexity becomes larger if the goods are more capital intensive. There might be loans involved, currency needs to be traded (FOREX trade), market swings in the commodity (futures and derivates) and transport risk (insurance) and similar. The finance market can service these issues in several ways. They can also help seller and buyer with the payment involved in a trade.
Bills of Exchange
There are several trade specific financial methods, which are used to service trade. The common form is to issue a bill of exch…

 

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