P2
Explain the types of finance available for international business
Prepayments by the importer
This is when a buyer wants a business’s products, they will send payments for these products
before they get the item. Doing this makes sure that the business has already got their money,
this means that the business knows that they don’t have to worry about not getting the money
for their items. This will provide security for the business.
Letters of credit
This is a document that guarantees that the product a business is selling will receive a payment
from the seller. It’s issued by the bank and will make sure a business will get a full payment for
their products. It will make a business feel secure when selling products, this is because if the
buyer is unable to pay then the bank will pay the business. This means there is no risk for the
business.
Exports credits
This is financial support that is given to businesses outside the UK. It will help them when buying
products from the UK. Normally the guarantee is given to businesses by export credit agencies.
It’s like a loan that helps to finance an export transaction.
Bank loans
Loans from a bank is where a business will have an agreement with a bank to borrow some of
their money. This could help when importing products. A business that would want to import
and export could use a bank/financial institution to help them. This is because of their financial
support when trading globally. A business will eventually have to pay the money that they
borrowed back. They will also have to pay interest on top of that. Interest rates are different for
different banks. They could also have a fixed rate loan. This is where the interest rate will stay
the same.
Financing options Apple will use
Apple will use a variety of these finance methods when doing business internationally. Apple are
unlikely to need any bank loans due to the size of their business. However, Apple do use letters of
credit and prepayments by importers.
Letter of credit
Apple will use letters of credit. Apple do trade internationally with different businesses. Apple do use
indirect distribution. This is where they will sell their products to different retailers around the
world. The retailers will then go on to sell apples products. When apple sell their products they will
want to make sure that they are being paid for their products. This means apple will most likely use a
letter of credit. This will ensure that they get money from the retailer they are selling to. It’s like
insurance for apple. For example, apple will sell their products in bulk to Argos. Apple will want to
make sure that they receive a payment for their products so they will use a letter of credit. This then
allows apple to export their products to the retailer.
Explain the types of finance available for international business
Prepayments by the importer
This is when a buyer wants a business’s products, they will send payments for these products
before they get the item. Doing this makes sure that the business has already got their money,
this means that the business knows that they don’t have to worry about not getting the money
for their items. This will provide security for the business.
Letters of credit
This is a document that guarantees that the product a business is selling will receive a payment
from the seller. It’s issued by the bank and will make sure a business will get a full payment for
their products. It will make a business feel secure when selling products, this is because if the
buyer is unable to pay then the bank will pay the business. This means there is no risk for the
business.
Exports credits
This is financial support that is given to businesses outside the UK. It will help them when buying
products from the UK. Normally the guarantee is given to businesses by export credit agencies.
It’s like a loan that helps to finance an export transaction.
Bank loans
Loans from a bank is where a business will have an agreement with a bank to borrow some of
their money. This could help when importing products. A business that would want to import
and export could use a bank/financial institution to help them. This is because of their financial
support when trading globally. A business will eventually have to pay the money that they
borrowed back. They will also have to pay interest on top of that. Interest rates are different for
different banks. They could also have a fixed rate loan. This is where the interest rate will stay
the same.
Financing options Apple will use
Apple will use a variety of these finance methods when doing business internationally. Apple are
unlikely to need any bank loans due to the size of their business. However, Apple do use letters of
credit and prepayments by importers.
Letter of credit
Apple will use letters of credit. Apple do trade internationally with different businesses. Apple do use
indirect distribution. This is where they will sell their products to different retailers around the
world. The retailers will then go on to sell apples products. When apple sell their products they will
want to make sure that they are being paid for their products. This means apple will most likely use a
letter of credit. This will ensure that they get money from the retailer they are selling to. It’s like
insurance for apple. For example, apple will sell their products in bulk to Argos. Apple will want to
make sure that they receive a payment for their products so they will use a letter of credit. This then
allows apple to export their products to the retailer.
