Types of export financing

Winning an order often depends on the exporter’s ability to offer financing to the importer, especially for exports to emerging markets.

Danske Bank offers a variety of flexible financing options and guidance to help your business select the type of financing that best suits your individual need.

 

Four types

A documentary credit (D/C) enables an exporter to offer the importer deferred payment. The exporter and importer must negotiate the terms and conditions of the documentary credit, including the expenses that the importer will bear.

The exporter and importer must agree on the following:

  • The rate of interest that the importer will pay on the deferred payment
  • The length of the credit period and the payment dates


Danske Bank’s role
The importer’s bank issues the documentary credit at the request of the importer. Danske Bank makes a financial commitment to the exporter and accepts the documentary credit issued by an acceptable bank. A guarantee from an export credit agency may also be required.

Expenses
Documentary credits entail the following expenses

  • Margin, management and commitment fee
  • Documentary credit charges
  • Guarantee premium to an export credit agency, if applicable.

Exporters should be aware that they bear an interest rate risk from when the contract is signed with the importer until Danske Bank finances the documentary credit. Exporters can also arrange with Danske Bank to cover this interest rate risk.

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