So, let’s consider what happens when a company decides that they want to sell goods abroad. As it turns out, it can be quite expensive to achieve financing because there are so many risks involved in trade.
So what drives up the costs of trade finance? In order to mitigate the risk of non-payment, sellers want to get paid as soon as they ship. But, buyers, on the other hand, want to mitigate the risk of non-delivery and wish to pay only after receipt. And, along the way are a host of risks ranging from natural disaster, piracy and outright fraud to contend with.