How to do banking for Import

Banks play a critical role in international trade by providing trade finance products that reduce the risk of exporting and importing. Banks play a major role by providing assistance in many ways to facilitate International Trade business. set up to promote Indian foreign trade. The bank also coordinates various institutions engaged in exports and imports.

How to Open Bank Account

When setting up any new business, a bank account will be required to handle the flow of money and funds. Unlike savings accounts that are preferred by individuals, businesses require current accounts. A Current Account can be opened with most of the Commercial Banks. The account has no transactional limit, so one can withdraw cash as many times you prefers to.

If you are running an export business, your interaction with the bank will be even more frequent compared to other business types because of foreign exchange, lines of credit, bank guarantees and other miscellaneous requirements.

To apply for a current account, you can either visit a branch of your preferred bank or access their official website to apply online.

A typical procedure to open a current account contains information like name and contact details, address and identity proof-related information, business details, banking services required, nominee details, and owner/controlling person details (with their requisite identity and address proofs, too).

You will have to furnish specific documents in order to open a current account in a bank. These documents will vary depending on your export business entity type, which could be a sole proprietorship, a partnership firm, a Limited Liability Partnership, a Private Limited Company, or a Public Limited Company, amongst others.

AD code letter from bank

An Authorised Dealer Code (AD Code) is a 14-digit numerical code provided by a bank with which your business has a current account. You will need to register an AD Code at every port from where your goods are cleared by customs.

How to get AD code from bank

Approach your bank where you have maintained your business current account. Write a request letter to bank branch manager for providing AD Code in the prescribed format. Obtain AD Code on bank letterhead in DGFT prescribed format. On obtaining the letter, register AD Code at every port from where you want to export

How to get Finance for Import

If you are a beginner in the import-export business, you might need some finances to get you started but the question is how to get finance for Import? While it’s possible to make good money importing and reselling goods, it may be difficult to get bank financing for an import business.

Before you import goods, you will almost certainly need funds to prepay manufacturers for goods and shipping costs. There are several ways to get import financing. On one hand, traditional finance institutions like banks and credit unions offer many options.

Ways of getting finance

Many varied paths you can source funds to finance your business like, Personal savings/ Owner’s fund, this is the next most common sources of funding after personal savings. This is the money you receive from wealthy family members or friends, Banks provide the major source of fund to businesses, investors lots of money who provide capitals for business start-ups., financing companies etc

There are multiple ways to finance a business and some might be better suited to your needs than others. Understanding how each one works and what’s good (or bad)  import business financing options can help you narrow it down

As an entrepreneur, it is advisable that you, first of all, determine how much your business really need before sourcing for funds

How to open LC for Import

You can approach your bank to open a Letter of credit. The concerned officer at bank helps you in filling up necessary application to open an LC. Since the LC is opened on the basis of your purchase contract, a copy purchase order / export contract has to be produced with along with other required documents.

Irrevocable Letter of Credit

This LC cannot be cancelled or modified without consent of the beneficiary (Seller). This LC reflects absolute liability of the Bank (issuer) to the other party.

Revocable Letter of Credit

This LC type can be cancelled or modified by the Bank (issuer) at the customer’s instructions without prior agreement of the beneficiary (Seller). The Bank will not have any liabilities to the beneficiary after revocation of the LC.

Standby Letter of Credit

This LC is closer to the bank guarantee and gives more flexible collaboration opportunity to Seller and Buyer. The Bank will honour the LC when the Buyer fails to fulfil payment liabilities to Seller.

Transferable Letter of Credit

This LC enables the Seller to assign part of the letter of credit to other party (ies). This LC is especially beneficial in those cases when the Seller is not a sole manufacturer of the goods and purchases some parts from other parties, as it eliminates the necessity of opening several LC’s for other parties.

Confirmed Letter of Credit

The Bank guarantee of the LC issuer, this LC type is confirmed by the Seller’s bank or any other bank. Irrespective to the payment by the Bank issuing the LC (issuer), the Bank confirming the LC is liable for performance of obligations

Terms and condition in LC

An LC is a commitment by a bank on behalf of the importer (foreign buyer) that payment will be made to the beneficiary (exporter) provided that the terms and conditions stated in the LC have been met, as evidenced by the presentation of specified documents. … The importer pays the bank a fee to render this service.

Letter of Credit Discounting

Discounting of Letter of Credit is a short-term credit facility provided by the bank to the beneficiary. Bank purchases the documents or bills of the Seller (beneficiary) after he fulfills certain compliances and provides the required documents to be dispatched to LC opening bank. On meeting these compliances as per the LC terms, the bank makes him/ her the payment for a security or a fee.

Letter of Credit discounting is a primary method of financing in international trade and is also known as a documentary credit. Fundamentally, it is a guarantee provided by a financial institution to pay sellers on behalf of buyers in case of default on their part. Letter of Credit discounting serves as financial security for businesses involved in either export or import or both.

Best Payment Term in Import

There are several complex processes involved, and plenty of options to consider for how these payments can be made – usually called payment terms or methods of payment. Add the fact that the payment terms you pick can be a factor in determining how attractive your offer is, and things get even more unpredictable.

payment is an important part of getting a profitable trade whether you’re exporting or importing goods. But the payment terms that are utilized can play an even more important role in attracting good trades in the first place, especially for sellers. Buyers ideally want to delay payment as much as possible, preferably until they receive or even sell the goods. Sellers also want to collect payment as early as possible, ideally before they send the goods or immediately upon receipt. All of this makes finding the right payment terms a balancing act that both parties want to get just right.

There are five major payment methods you will often see parties adopting in international trade. These are cash in advance, letter of credit, documentary collections, open account, and consignment.

Swift Transfer, TT payment

The term telegraphic transfer is used as a broad description for many different methods of moving money between accounts. … SWIFT payments – or international wire transfers – are specifically those money transfers which use the SWIFT network, to move money between accounts based in different countries.

Forward contract

A forward contract is a customized contract between two parties to buy or sell an asset at a specified price on a future date. A forward contract is a type of derivative. A derivative is an investment contract between two or more parties whose value is tied to an underlying asset or set of assets. For example, commodities, foreign currencies, market indexes and individual stocks can all be underlying assets for derivatives.

In a forward contract, the buyer takes a long position while the seller takes a short position. The idea behind forward contracts is that the parties involved can use them to manage volatility by locking in pricing for the underlying assets. In that sense, a forward contract is a way to hedge against market uncertainty

How to send money in import

There are a variety of ways that payments can be made, including a different level are Telegraphic Transfer, Mail Transfer, Bank Draft and Cheques, Bill of Exchange and Letter of Credit.

A letter of credit is the most well known method of payment in international trade. Under an import letter of credit, importer’s bank guarantees to the supplier that the bank will pay mentioned amount in the agreement, once supplier or exporter meet the terms and conditions of the letter of credit.

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