A Trade Facility offered by banks in Singapore refers to various financial services and instruments that are designed to support and facilitate international and domestic trade transactions for businesses. These facilities are crucial for companies engaged in import and export activities as they help manage risks, ensure the smooth flow of goods and payments, and provide the necessary financial resources.

For example, an Export Letter of Credit will help you mitigate the risks of dealing with less familiar counterparties, financial institutions, or higher risk countries. With the assurance of payment upon your fulfilment of underlying trade transaction and documentary requirements, you will now have the confidence to expand to new markets and focus on growing your business.

A Trade Facility can further enhance acceptability of your business propositions and financial obligations by issuance of Banker’s Guarantees or Standby Letters of Credit to back up your financial and performance obligations between your good company and your counterparty.

Letter of Credit (LC): A letter of credit is a written guarantee issued by a bank on behalf of an importer (buyer) that promises to pay the exporter (seller) a specified amount once certain conditions are met. It provides security for both parties in the transaction.

Export and Import Financing: Banks offer loans and credit facilities to businesses for financing the purchase or sale of goods in international trade. These loans can be short-term or medium-term and help companies manage working capital needs.

Bank Guarantees: Banks issue various types of guarantees, including bid bonds, performance guarantees, and advance payment guarantees, to ensure that contractual obligations in trade transactions are met.

Supply Chain Financing: This facility allows businesses to optimize their supply chain by offering early payment options to suppliers or financing invoices, thereby improving cash flow throughout the supply chain.

Documentary Collections: This is a method of payment in which a bank acts as an intermediary to facilitate the exchange of documents between the buyer and seller, ensuring that payment is made upon the presentation of the required documents.