What Does Cash Against Documents Mean?

Posted by on April 6, 2016 in Business Financing | Comments Off on What Does Cash Against Documents Mean?

Who Benefits From Cash Against Documents (CAD) Transactions? International trade can be tricky business on both sides of the border. Straight credit is ideal, but usually impossible to obtain when trying to purchase goods from an overseas exporter. Cash Against Documents (CAD) financing is the solution that helps ensure that exporters get their money on time while importers get the goods needed for their business. What does Cash Against Documents Mean? Simply put, CAD financing is a method in which an importer pays for goods before receiving them. To ensure that both the parties are satisfied with the transaction, a third party accepts the shipping and title documents for the exported goods. These are not released to the buyer – or importer – until the payment is received. This situation is similar to real estate transactions, where an uninterested party holds money in escrow until the transfer of the home’s title is complete. There is a benefit of CAD financing for both sides. The exporter is guaranteed the payment for the goods shipped, and the importer can ensure that they receive precisely the goods they paid for. This method eliminates the headache of having to try and resolve business transaction issues across borders, once that transaction is complete. Comparing Cash Documents vs Letters of Credit Letters of Credit are another financing method used to help facilitate international trade deals. Like with CAD financing, letters of credit benefit the exporter who is unwilling to offer open trade credit. One reason for this is because they’re unfamiliar with the importer, or that the buyer does not have a credible credit history. The actual letter of credit is a formal letter provided by the importer’s bank, promising their financial support to the buyer and this gives the exporter the right to demand that the bank will pay for the shipment if the buyer does not pay. This can be for a one-time purchase, or the buyer could establish a line of credit with the financial provider that allows them to make regular purchases from the same exporter. The seller gets the most advantage from letters of credit, as their payment is virtually guaranteed unless there is a severe breach of the agreement they have made with the importer. For the buyer, this method affects their line of credit and credit score, potentially interfering with their ability to deal with other vendors or take out business loans to increase their productivity. For some who do not have a stellar credit score, the bank may even insist on a cash deposit to secure the amount listed on the letter of credit. What are the Cash Against Documents Terms? The terms and conditions for a successful CAD transaction are straightforward. The documents for the shipment are prepared by the exporter once the buyer places the order. Those documents are then sent to the financial institution that is facilitating the transaction and held until the shipment arrives and the buyer makes the payment for the goods. Once payment is received, the documents are given to the importer, while the exporter receives the funds. Even though a third party is holding the shipping documents, the exporter retains ownership of the goods until the funds are transferred. The importer cannot take ownership of the property in the shipment until they are given the title and shipping documents. Qualify today! Fast, secure funding now or contact our National Sales Manager, Chris Curtin via email or 888-400-5931 ext 1. What is the Cash Against Documents Process? The exporter or seller typically initiates the CAD transaction. Once the order from the international buyer is accepted,...

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If You Import Goods, You Need to Understand The Cash Against Documents Process

Posted by on January 5, 2016 in PO Financing | Comments Off on If You Import Goods, You Need to Understand The Cash Against Documents Process

If your company imports finished products, raw materials, or components into the U.S., you need to know about the Cash Against Documents (CAD) payment method. CAD is a process in which an importing firm must pay for goods it purchases in full before it takes ownership of those goods. The transaction typically involves a third party that retains possession of the shipping papers until it receives payment from the buyer. In recent years, Cash Against Documents transactions have been particularly important in importing goods from China, a major trading partner of U.S. companies. CAD financing can be used by businesses of all sizes — small and medium-sized businesses, commercial companies and corporations. Under CAD, the pricing of imported items will be different depending on the shipping terms of the sale. For example, an item may cost $10 per item FOB China, or $25 FOB Miami, FL. In the case of FOB China, the importer transfers the funds before they are shipped and cannot inspect them for quality and/or quantity. If it is FOB Miami, the importer is able to physically inspect the goods before making the funds transfer to pay for the items. Of course, the lower price for FOB China comes with a potentially higher risk that the goods may be damaged, or may not be made exactly to specifications. As an importing company, you or a logistics consultant that you hire, will need to weigh the risks of your shipping options against the benefits. As part of the Cash Against Documents process, the exporting firm, e.g., in China or another country, retains ownership of the goods you are importing until payment is made in full to the exporter. Once the payment is made through your financing firm, all documents related to the transaction are released to your firm. Paragon Financial, with a two-decade history of working with small and mid-sized firms, can provide you with the highest-quality Cash Against Documents financing for importing the goods you need to conduct your business. With a superior level of international trade finance experience, we can not only provide the financing for your transaction, but make sure that all documentation is completely and accurately fulfilled. Ready for fast, secure funding now from an experienced factoring company? To learn more, please contact our National Sales Manager, Chris Curtin via email or toll-free at 888-400-5931 ext 1. Money When Your Business Needs It...

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Understanding Methods of Payment in International Trade

Posted by on June 26, 2015 in Business Financing | Comments Off on Understanding Methods of Payment in International Trade

To succeed in today’s global marketplace and win sales against foreign competitors, exporters must offer importers attractive sales terms supported by the appropriate payment methods. Getting paid in full and on time is the ultimate goal for each export sale, an appropriate payment method must be chosen carefully to minimize the payment risk while also accommodating the needs of the buyer. Paragon Financial has been funding exporters and importers since 1994.    We work with your company to help ensure a successful and profitable transaction.  Give us a call at 888-400-5931 today, fill-out the form to the right or chat with us. Listed from least risky to most for the seller: Method Usual Time of Payment Goods Available To Buyer Risk to Seller Risk to Buyer Comments CASH IN ADVANCE Before shipment After payment None Complete – relies on seller to ship exactly the goods expected, as quoted and ordered Seller’s goods must be special in one way or another, or special circumstances prevail over normal trade practices (example, goods manufactured to buyer-only specification). CASH AGAINST DOCUMENTS After shipment After payment If payment not honored, goods must be returned or resold. Storage, handling, return freight expenses may be incurred Assures shipment but not content, unless inspection or check-in is allowed before payment Security to the seller is assured if the transfer of funds is confirmed prior to buyer taking possession of the goods. LETTER OF CREDIT (See next two items.)     Commercial Invoice must match the Letter of Credit exactly. Dates must be carefully headed – “Stale” documents are unacceptable for collection.   Letters of Credit require total accuracy in conforming to terms, conditions, and documentation. Confirmed Irrevocable Credit After shipment is made, documents presented to the Bank After payment Gives the seller a double assurance of payments – Depends on the terms of the letter of credit. Assures shipment is made but relies on exporter to ship goods as described in documents. Terms may be negotiated prior to letter of credit agreement, alleviating buyer’s degree of risk. The inclusion of a second assurance of payment (usually a “reputable” Bank) prevents surprises, adds assurance that issuing bank has been deemed acceptable by confirming bank. Adds cost and an additional requirement to seller. Unconfirmed Irrevocable Credit Same as above Same as above Seller has single bank assurance of payment and seller remains dependent on foreign bank. Seller should contact his banker to determine whether or not the issuing bank has sufficient assets to cover the amount. Same as above Credit can be changed only by mutual agreement, as stipulated in a sales agreement. Becomes open account with buyer’s bank as collection agent. Foreign bank may have problems making payment in sum or timeliness. DRAFTS/ BILLS OF EXCHANGE (See next two items.) Remittance time from buyer’s bank to seller’s bank may still take one week to one month   Drafts, by design, should contain terms and conditions mutually agreed upon   A draft may be written with virtually any term or condition agreeable to both parties. When determining draft tenor (terms and conditions) consult with your banker and freight forwarder to determine the most desirable means of doing business in a given country. Sight Draft (with documents against acceptance) On presentation of draft to buyer. After payment to buyer’s bank. If draft not honored, goods must be returned or resold. Storage, handling, return freight expenses may be incurred. Assures shipment but not content, unless inspection or check-in is allowed before payment. A draft can be a collection instrument used to exchange possession and title to goods for payment. Seller is essentially...

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Financing an Orlando Florida Consumer Goods Importer – Invoice Factoring

Posted by on May 29, 2012 in International Home Goods Importer, Success Stories | 0 comments

One client, multiple financial solutions Invoice Factoring, Vendor Guarantees, Cash Against Documents Financing Client: An importer of French and Chinese goods with corporate offices in Orlando, FL Industry: Consumer Goods Situation: The Company imports consumer goods such as Ferrari Bicycles, Ferrari Baby gear, and The Checker Flag motorsport apparel and resells them to retail stores in the United States. They have an agreement with one French manufacturer to be their U.S. distributor. They had an opportunity to work with retail giants Burlington Coat Factory and Buy Buy Baby, but didn’t have the cash they needed to purchase enough product to fill the purchase orders. The Deal: In comparing financing options, the Company chose Paragon Financial over other companies because we could offer three different financing solutions all in one place, a rarity.  We provided: A $1 million Invoice Factoring line of credit. Vendor Guarantees based on our capital strength to get imported goods released from the freight forwarder. Cash Against Documents Financing that was required by some of the Company’s manufacturers before the goods could be released from the freight forwarder. Paragon took care of all the due diligence for the Cash Against Documents financing and negotiated with the vendors to accept the Vendor Guarantees to complete the deal seamlessly. Result: Our one-stop-shop financing options gave the Company the ability to pay suppliers, get the goods shipped and fill purchase orders. It also gave them the working capital they needed to grow the business: since beginning our relationship the Company has expanded 30 percent. About Paragon: For over 23 years, Paragon Financial Group has provided working capital solutions for growing companies throughout the U.S. They serve small to large-size companies across a wide variety of industries through accounts receivable, invoice factoring, and purchase order financing up to $3 million per month in volume. Paragon is a leading source for receivables financing, government contract financing, payroll funding, and purchase order...

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