Finance: Exporters Beware
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“A disturbing trend is emerging that foreign banks are either limiting or withdrawing completely the advances, overdraft facilities and credit lines to many companies,” says Ismail Dadabhay, General Manager Exports at Credit Guarantee Insurance Corporation.
This has a direct and sometimes disastrous consequence for exporters wishing to trade with those companies, as they now simply have no choice but to renege on payments for the goods they have purchased. Even if payment was done on a letter of credit, there is no guarantee that payment will be received locally.
This has chased many foreign companies into receivership or to seek protection from creditors, depending on the legislation of the importing country, leaving the exporter with a potentially irrecoverable bad debt.
Dadabhay warns that now is not the time to gamble with payment as there are too many factors influencing business, many beyond the control of the foreign importer, no matter how good the intention is to pay.
Business News Sector Tags: Finance|