International Marketing Practices

against payment. Documents against acceptance provide a draft to ensure that the money will be paid at a future date [20]. Credit is extended to the buyer on the basis of the draft and the agreement to pay by the deadline. However, there is notable risk that the buyer cannot or will not fulfill the draft. Finally, documents against payment ensure that the buyer pays for the goods prior to receiving the complete ownership title [20]. Cash-in-advance. To cover risk associated with currency exchange, pushing the risk onto the buyer, many firms utilize cash-in-advance financing [20]. Cash-in-advance requires importing firms to pay for goods in full before ownership is transferred, often facilitated by credit cards or wire transfers [196]. Foreign buyers can be skeptical of these payments owing to the risk that goods may not be shipped after the exporter receives payment in full, so you should be wary of this skepticism as you determine competitive payment methods for your products [196]. Export working capital financing (EWC). EWC is provided by commercial lenders and allows small to medium sized firms to offer consigned goods or open account terms through financing and credit, particularly for materials, labor, and inventories (see Table 18) [197]. EWC financing is secured through personal guarantees or assets, making it ideal for high capacity operations. [197]. Factoring. Factoring is often used for domestic trade, but it is also available as export financing, combining services like export working capital financing, credit protection, foreign accounts receivable bookkeeping, and collection services [198]. Factoring is well-suited for small to medium sized firms, particularly for continuous short-term sales of consumer goods on open account terms. But this form of financing can be difficult for firms entering into export operations, as they do not take on a client for a one-time deal and require access to a certain volume of annual sales [198]. Forfaiting. Forfaiting typically occurs with capital goods and commodities, allowing exporting firms to operate in risky markets by selling their medium and long-term foreign accounts receivable, like bills of exchange, promissory notes, and letters of credit, extending from 180 days to seven years [199]. The minimum transaction size for forfaiting is $100,000, making it ideal for large, established corporations and requiring small to medium sized firms to weigh their options [199]. Letters of Credit Letters of credit are extremely important for international trade, as they are the most common payment arrangement in exporting operations. A letter of credit provides security through a bank, guaranteeing payment to the seller if the terms of sale are delivered upon [38]. There are two types of letters of credit: irrevocable and revocable [23]. Irrevocable letters of credit allow for modification only with the

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