Understanding Cash Against Documents (CAD)
Doing business internationally is risky. Suppliers and buyers alike face risks; for the buyer, it means putting up money without a guarantee of delivery and for sellers, shipping products without cash upfront could mean they lose product to non-payment. Cash against documents (CAD) is used to ensure an importer pays for goods before they are in receipt of those goods.
Minimizing Importing/Exporting Risks
The best explanation of how an import/export transaction works is to think about the process you go through when purchasing a home. There is an escrow agent that holds funds until the transaction is complete. Once the seller has signed the appropriate documents, and the buyer has signed the mortgage notes, then the escrow agent releases the funds for the transaction. This is similar to how an international transaction would work.
The seller of products maintains the ownership rights to the items they are selling until such time as the buyer makes payment. Prior to that, an intermediary, which is generally a bank, holds the documents that include import papers, invoices, and bills of lading. The intermediary also holds the funds for the transaction. Once the buyer has accepted delivery of the product, the funds are released to the seller.
Your Partner for Import Financing
Capstone has extensive experience dealing with international transactions. We understand sometimes the best, cost-effective materials must be purchased overseas. We also understand, in many cases, you are buying large quantities of materials which can involve a significant investment. We can help you with a broad range of import financing solutions and assistance including:
- Setting up the required import services
- Assistance with air and sea shipping
- Making inland freight arrangements,
- preparation of shipping documents
- Preparation of export licenses
- Establishment of letters of credit
We provide these services to businesses in a range of fields. Small and medium-sized business owners often do not have the resources necessary to have an internal department to handle these challenging transactions; Capstone can help.
How Letters of Credit Work
A letter of credit has specific elements. The issuer of the letter of credit, acting for the buyer, agrees to pay the seller a specific amount of money under specific conditions. Before these funds are released, however, the seller must present the appropriate documents providing that the number of goods has shipped, the quality of the goods has been verified and the goods have shipped on time. There are time limits for meeting this obligation. Once the documents have been verified, assuming they conform to the terms and conditions set out in the letter of credit, and the buyer takes possession of the goods, the funds are released to the beneficiary, the seller.
How Does Capstone Help?
Capstone is committed to assisting clients with financing for their business. We understand how difficult international transactions can be and we are committed to ensuring your hard-earned money is protected. We can help provide you various services including helping you secure a letter of credit to ensure your international transactions go smoothly.
Our goal is to make sure you can get the presold goods you need without having to put up the full amount of the purchase up front.
Letters of credit can be used for a single transaction or may be used for ongoing transactions. We understand every business has different needs, and we also understand no two transactions are the same. We will customize a solution that works to meet your individual business needs.
Advantages of CAD Financing
Cash against documents provides a win/win for everyone involved. Most importantly, the buyer typically does not need a bank line of credit. The costs involved in these transactions are usually lower than with other international financing options. We also make sure the process is easy to implement and fast. We understand how important it is for you to have the materials you need for your business and the risks involved in international transactions. Let us help you take advantage of this important tool for your international business needs.
Capstone understands every business owner, business, and the transaction is unique. This is one of the reasons we work tirelessly to find a solution that works for your business. Whether you need a one-time customized solution for a big shipment, or your business will be accepting international deliveries on an ongoing basis, we can help. For more information on how Capstone Corporate Funding can help you with your international transactions, or to receive a quote, please email us at [email protected] or call us at (212) 755-3636 to speak with one of our skilled representatives today.