Trade Finance/Selecting Payment Methods

Trade Finance

Introduction | M.1 Political and Economic Risk | M.2 Risk Mitigation Techniques | M.3 Commerical Risk | M.4 Payment Methods | M.5 Selecting Payment Methods | M.6 Financial Plan | M.7 Short-term Financing | M.8 Medium- and Long-term Financing

Module 5: Selecting Payment Methods

Module Introduction

The objective of this module is to select appropriate methods, terms, and currency of payment to agents, sales representatives, distributors, suppliers, and international joint ventures.

This resource on international finance is focused on the global business professional who is a generalist who may be involved in the sale and/or purchase of goods and/or services internationally. It is essential that a global business professional understand and be able to use the methods of payment available for international business transactions. You will need to be able to determine and select the appropriate method of payment, terms and currency that pertain to the different modes of entry available to international markets. Task 5 consists of two knowledge statements. The challenge for any global business professional in understanding this information is that decisions will be affected by the level of country and commercial risks present in the market and the product or service being offered. It is important, then, that you are comfortable with Modules 1 and 4 of this resources as well.

In this module, you will gain

• knowledge of terms and condition of purchase or sale.
• knowledge of resources: banks, U.S. government agencies, International Chamber of Commerce, and others that may become available.

These unit objectives provide an outline for the terms and conditions of purchase or sale as well as the resources available to support the purchase or sale. Understanding how each of the unit objectives relates to and affects the others is also important. You must

• know the methods of payment and their associated risks for the buyer and seller.
• be able to select the appropriate mode of entry into a market and the terms of sale, which are often dependant on the commercial, economic and political risks evident in a country and will dictate the method of payment chosen for the transaction.
• know how the modes of entry for international transactions will dictate the ways business is conducted as well as the costs and the responsibilities for each party involved.
• know the responsibilities of each party that should be defined clearly in a contract, realizing, however, that the rules governing such instruments are dependant on the countries and parties involved in the transactions.
• be aware of and know how to utilize available international business resources that may reduce the risks and cost of doing business.

Module Sections

• Unit 5.1: Terms and Conditions of Purchase or Sale
• Unit 5.2: Resources for Selecting Payment Methods

About this Resource

These resources were developed by MSU Global with funding provided by a U.S. Department of Education, Business in International Education Title VIB grant.