Introduction

All sellers want to get paid as quickly as possible, while buyers usually prefer to delay payment, at least until they have received and resold the goods. This is true in domestic as well as international markets. Increasing globalization has created intense competition for export markets. Importers and exporters are looking for any competitive advantage that would help them to increase their sales. Flexible payment terms has become a fundamental part of any sales package. Selling on open account, which may be best from a marketing and sales standpoint, places all of the risk with the seller. The seller ships and turns over title of the product on a promise to pay from the buyer. Cash-in-advance terms place all of the risk with the buyer as they send payment on a promise that the product will be shipped on time and it will work as advertised. Today, open account terms with extended dating are becoming more common despite the dangers.Trade finance provides alternative solutions that balance risk and payment. In this overview, we'll outline the two broad categories of trade finance:

Pre-shipment financing to produce or purchase the material and labor necessary to fulfill the sales order; or Post-shipment financing to generate immediate cash while offering payment terms to buyers.

General Considerations
The following factors and considerations apply to financing in general.

1. Financing can make the sale

Favorable payment terms make a product more competitive. If the competition offers better terms and has a similar product, a sale can be lost. In other cases, the exporter may need financing to produce the goods or to finance other aspects of a sale, such as promotion and selling costs, engineering modifications and shipping costs. Various financing sources are available to exporters, depending on the specifics of the transaction and the exporter's overall financing needs.

2. Financing Costs
The costs of borrowing, including interest rates, insurance and fees will vary. The total cost and its effect on the price of the product and profit from the transaction should be well understood before a pro forma invoice is submitted to the buyer.

3. Financing Terms
Costs increase with the length of terms. Different methods of financing are available for short, medium, and long terms. Exporters need to be fully aware of financing limitations so that they secure the right solution with the most favorable terms for seller and buyer.

4. Risk Management
The greater the risks associated with the transaction, the greater the cost. The creditworthiness of the buyer directly affects the probability of payment to an exporter, but it is not the only factor of concern to a potential lender. The political and economic stability of the buyer's country are taken into consideration. Lenders are generally concerned with two questions:

Can the exporter perform? They want to know that the exporter can produce and ship the product on time, and that the product will be accepted by the buyer.

Can the buyer pay? They want to know that the buyer is reliable with a good credit history. They will evaluate any commercial or political risk.

If a lender is uncertain about the exporter's ability to perform, or if additional credit capacity is needed, government guarantee programs are availalbe that may enable the lender to provide additional financing.

5. Export Intermediaries
Many times, small business owners may not have the time or resources to pursue international sales. If there is a demand for the company's product, use of export intermediaries may prove beneficial. Export Trading Companies (ETCs) and Export Management Companies (EMCs) can help with international sales and marketing efforts. In some instances, EMCs can help finance export sales. Some of these companies may provide short-term financing or may simply purchase the goods to be exported directly from the manufacturer. This eliminates any risks associated with the export transaction as well as the need for financing. Larger enterprises involved in online commerce can expand the way they do business and trading with dependable online payment processing services.

Sources of Export Financing

TradePort is affiliated with a managed financial network of banks, lenders and brokers focused on the small business market. TradePorts trade finance partners bring together the international trade strengths of the California Trade Partners (CTP) network, private sector banks and lenders, such as, DS-Concept Factoring, Inc., the U.S. Commercial Service, Meridian Finance Group, the U.S. Export-Import (EXIM) Bank and the Small Business Administration (SBA) all designed for the benefit of small business trade development.

1. Export Credit Insurance

You need to extend competitive credit terms to grow your international business, but what happens if you dont get paid? Your foreign customers could go out of business or file bankruptcy, face currency devaluations or foreign exchange problems, run short on cash, take you for a ride, or fail to pay you for any number of other commercial or political reasons. You can protect your foreign receivables against virtually all non-payment risks with an export credit insurance policy. Export credit insurance is an effective sales tool that enables you to extend competitive payment terms with confidence. It can help you penetrate new markets, negotiate larger order quantities, establish or expand distribution, and increase the profitability of your export business. If you finance your receivables, the coverage will also make your foreign A/R more attractive to banks, factors, and other lenders so you can negotiate the most favorable advance rates and loan terms. Export credit insurance is available from specialized brokers like Meridian Finance Group.

2 .Commercial Banks
Large multinational banks are generally thought to be the most experienced in trade finance. Frequently these services are reserved for their major clients and maintain transaction minimums of $1M or more. These banks are less interested in working with small businesses because of smaller deal size and volumes accompanied by greater risk. In fact, small importers and exporters often present a business profile that creates obstacles to financing. Even SMEs with large trade deals are not attractive to larger banks due to risk and credit issues such as loan concentration, debt-earnings ratio restrictions or insufficient collateral. It is important to select a lender that is sincerely interested in serving businesses of similar type or size. If your bank lacks an international department, it may refer you to a correspondent or partner bank. There are nonbanks lenders and service providers that specialize in trade finance.

3. Export Import Bank of the United States (EXIM Bank)

EXIM Bank is an independent federal government agency responsible for assisting export financing of U.S. goods and services. It offers a variety of information services, insurance, loan, and guarantee programs. Ex-Im Bank operates an export financing hotline that provides information on the availability and use of export credit insurance, guarantees, direct and intermediary loans extended to finance the sale of U.S. goods and service abroad. Briefing programs are offered by Ex-Im Bank to the small business community. These programs includes regular seminars, group briefings, and individual discussions held both within the Bank and around the country.

Role of Commercial Banks, EXIM Bank, SIDBI, EPGC in Export Finance 1. Significance
Without commercial banks, the international finance and import-export industry would not exist. Commercial banks make possible the reliable transfer of funds and translation of business practices between different countries and different customs all over the world. The global nature of commercial banking also makes possible the distribution of valuable economic and business information among customers and the capital markets of all countries. Commercial banking also serves as a worldwide barometer of economic health and business trends.

2. Foreign Branch Banking

Some small commercial banks limit their reach to the local business community; but as business has gone global, so have commercial banks. Large banks such as Citigroup, Bank of America and Chase are retail (consumer) banks that also maintain full commercial banking activities in the United States with branches in many countries. These larger banks may act as affiliates of smaller banks that do not have branch presences in other countries. Through foreign branch banking, U.S. based multinational companies can consolidate their financial business at a single bank that handles their trade finance, currency transactions, project loans, payroll, cash management investments and deposit accounts throughout the world. Commercial banks also arrange deals between their customers globally, including strategic partnerships and project fulfillment agreements.

3. Trade Finance
Commercial banks doing international business are also called merchant banks because they finance trade between companies and customers located in different countries. This is done by issuing LOCs that indicate the customer has deposited the full amount due on an order with a company located in a different country. The seller company can then feel assured of being paid if it ships goods to its offshore customer. The LOC may also be used by the company to guarantee a manufacturer's loan, allowing it to finance the manufacture of the goods to be delivered. Without LOCs, companies would face considerable expense in investigating their foreign customers to make sure they are legitimate and creditworthy, and complying with laws and regulations of the different countries in which they do business.

4. Foreign Exchange
In order to facilitate international trade and development, commercial banks convert and trade foreign currencies. When a company is doing business in another country it may be paid in the currency of that country. While some of these revenues will be used to pay workers in that country and for administrative expense such as office rent, utilities and supplies, the company may need to purchase goods from a neighboring country in that country's currency, or convert cash to its native currency for return to the home office.

5. Corporate Finance
Companies always need to borrow money to cover purchases of raw materials, machinery parts, inventory and/or payroll. Banks with overseas branches or affiliates can simplify the process of corporate finance throughout a company's organization by consolidating the transaction procedures, reporting and record keeping.

It is much easier for a company manager to do business in her own language with a banker located nearby who handles her global business finance needs than it would be for her to develop banking relationships in every country where she does business. Her international commercial bank can also provide referrals to professional service firms in other countries, as well as arrange introductions to other companies appropriate as customers or for strategic partnerships.

6. Miscellaneous Banking Services

Corporate checking accounts, currency specific credit cards and lock boxes are also offered by commercial banking to help make foreign trade possible for a company. Lock boxes are particularly helpful for collecting payments from overseas customers and reporting receipts daily for cash management purposes. Currencyspecific credit cards are also important in eliminating the cost of cross currency purchasing, which normally is done at expensive valuation levels.

Conclusion
E x p o r t F i n a n c e i s a v e r y i m p o r t a n t b r a n c h t o s t u d y & u n d e r s t a n d t h e o v e r a l l gamut of the international finance market. Availability of favorable Export finance schemes directly impacts the local trade, e n c o u r a g e s e x p o r t e r s , e n l a r g e s m a r k e t s a b r o a d , i m p r o v e s q u a l i t y o f d o m e s t i c goods and overall helps the nation boost its exchange earnings. The Government of any nation plays a very vital role in boosting export turnover. The credit policy of the Indian Government is also changed depending upon the n e e d s o f t h e e x p o r t e r s , g l o b a l t r a d e e n v i r o n m e n t e t c . T h e c r e d i t p o l i c y o f O c t 2001 is a pointer in this direction. ECGC and EXIM Bank take a lot of efforts for Export promotion. The strategies of these 2 agencies in India should be flexible & their finance schemes should be constantly synchronized with the changing scene of world trade. This alone can help Indian exporters to stand competition in world markets effectively and more gain-fully. Finally, a very essential question needs to be answered by the International Trade gurus with reference to Relevance of EXIM Policy in the current times. EXIM policies had emerged when the state decided to limit imports and encourage exports in order to maintain currency reserves. However, such ideas backfired : consumers were hurt and producers turned lazy

Bibliography Books Referred:

Export What Where & How by Paras Ram Export Marketing by Michael Vaz Export Management by T.A.S. Balgopal Internet Resources
http://www.tradeport.org/index.php/trade-toutorials/68 http://smallbusiness.chron.com/role-commercial-banks-international-business-733.html http://www.eximbankindia.com/ http://en.wikipedia.org/wiki/Exim_Bank_%28India%29