Letter of Credit Forum

hi ponnuss,

am not sure if i got your query correctly. am guessing that you want to know what are the modes of an exporter to avail finance under open account. if so, then the methods are various...

fundamentally, you can classify these as with recourse or without recourse methods.

in the with recourse methods, there are the basic post shipment financing or discounting or export credit agency financing or  insurance backed lending or even say the very latest and probably still in its infancy - the banker's acceptance (or ba as it's called).

in all these, essentially, the lender takes a a substantial credit risk instead of only the trade risk on the buyer and the seller and chooses to lend against a receivable. the title documents and other endorsements would serve only as credit enhancers.

the other side of the spectrum sees the without recourse funding. here, more often than not, there is an involvement of an outright purchase of either the trade documents or the trade portfolio. negotiation of trade documents (on a case to case basis) or factoring (for the portfolio) are the commonest form of such lending.

cheers

It was really great experience to know about these facts.