Business - Trade Finance - Relevance
Xoxo and Yoyo met at a conference, connected over a sip of coffee, and soon churned into camaraderie. Let us investigate their latest relevant extract of the conversation in the context of business.
Mr. Xoxo : You are such a great guy Mr. Yoyo :)
Mr. Yoyo : Ohh, so nice! You are being kind! Thanks.
Mr. Xoxo : Hey you trade in cashews, isn’t it?
Mr. Yoyo : That’s right.
Mr. Xoxo : Can you send me 1,00,000 boxes, I’ll pay later part of the month?
Wait, wait, wait, hold on! What did he say, “Later part of the month”.
Guys what do you think should Yoyo sell to Xoxo? Agree or disagree?🤷🙌
Traditionally business was mainly carried on in the area wherein people use to live. Everyone used to know each other mostly. Hence, selling goods on credit was never an issue. Gradually, as the demand and supply evolved, as a people we evolved, technology evolved, new knowledge came in and hence the system was designed to ensure free flow of goods or services outside the boundaries people were confined too. Hence, the word “trade” as it helps in trading(buying and selling), “finance” as it helps in bridging the main gap of “safety of receipt of money”.
Now let’s answer to our questions, should Yoyo sell to Xoxo?
💡Yes it should. Did I hear Yes! Yeah, you do! :)
However it should take the help of trade finance to do so. By doing so, they will not only cover the risk of uncertainty in near future but will also save on the lengthy unnecessary banters in case of any issues in the near future. So nurture your friendship and business too :).
Help of trade finance, How?
💡Letters of credit helps to facilitate the trade by ensuring promised goods as specified get sold to buyer as well as seller gets its money in return. More on this in coming topic we will cover.
Trade finance is a deep ocean and we will get more into it in coming writings like,
Trade finance and letters of credit
Regulations governing trade finance - Letters of credit
Key things to consider while being new into this area of playground
Thank you.✔👍
