Trade Finance Deep Dive

What You Can Do After This Chapter

Learning objective. Learner explains trade finance, describes documentary credits with confirming and notifying banks, documentary and simple collections, and shows how bills of exchange and promissory notes work in practice. Learner also describes negotiable instruments and cash management basics for trade customers.

Practical assessment. Learner receives a case where a German exporter sells EUR 180,000 of machinery to Poland under a confirmed documentary credit and EUR 12,000 of spare parts under a simple collection, then drafts the MT700 credit, the confirmation steps, the MT400 collection instruction, and the bill of exchange for the spare parts. Learner also explains the cash management view across both deals.

Expected deliverables.

• Documentary credit flow: MT700, confirmation and document check
• Simple collection flow: MT400, acceptance and payment at maturity
• Bill of exchange and promissory note comparison with four-corner models
• Negotiable instruments note: endorsement and holder in due course
• Cash management view for the EUR 180,000 and EUR 12,000 deals

Completion criterion. Learner drafts a correct confirmed credit flow and a correct simple collection, explains the bill of exchange four-corner model, and shows the cash timing for both deals.