Question

Can anyone explain the sellers bank and buyers bank when dealing with trade finance?

Answer 1

When there is a trade between two countries the buyers bank or the importers bank issues a letter of credit to the exporter. The letter of credit gives a payment guarantee to the exporter of goods provided the conditions of the delivery of goods or services are fulfilled. The issuing bank is generally located in the same country as importer.

The exporter's bank is the sellers bank. This bank may make a loan to the exporter on the basis of the export contract. They assist the exporter by providing the required finance and foreign exchange to complete the trade.