trade finance red flags

The method used to detect problems with an investment opportunity depends on the research methodology an investor, analyst, or economist employs.

Requests for quotes or product descriptions are made to obtain and misuse a legitimate supplier's letterhead or business logo. Multiple changes in the financed amount requested, description of goods needed, or suppliers and exporters. Consumers begin to curb their spending, holding off on purchasing things like furniture, clothing, food, electronics, and appliances. Below are seven red flag identifiers outlined by U.S. EXIM's office of Inspector General: Borrowers, exporters, and foreign agents will misrepresent or omit the identity of parties involved, monies transferred, or authenticity of business operations to cover up fraud.

Red flags may appear in the quarterly financial statements compiled by a publicly-traded company's chief financial officer (CFO), auditor, or accountant. Shipper's Export Declaration may reflect actual goods and true market value, in conflict with the Commercial Invoice. Is fraud on the rise? Bubbles are generally characterized by a rapid increase in asset prices and are deflated after massive sell-offs.

Stock market bubbles may be one indication.

Red flags tend to vary.

The term red flag is a metaphor.

Buyers and exporters claim and provide "proof" that goods have been paid, then request reimbursement to redirect loan proceeds. What the Price-To-Book Ratio (P/B Ratio) Tells You?

This may be due to higher debt levels, a lack of change in income levels, and even job security. Product is readily available to borrower in-country, at lesser cost.

What the OW Bunker incident demonstrated was the value of being protected against nonpayment risk.

Most cases concern small invoice amounts at first, well within your company’s credit limits, so they stay below the radar.

Economists and investors are able to identify signals that the economy is in trouble or is heading toward a downturn.

More to the point is that new markets present new challenges for all parties. This led to a large number of trade credit insurance claims as many fuel traders and producers are traditional buyers of trade credit insurance. Red flags may not be readily apparent on a financial statement, so it may take further research and analysis to identify them. In business, there may be red flags that warn investors and analysts about the financial future and/or health of a company or stock.

If not remedied in a timely fashion, investors will question why the company is unable to sell its inventories and how this will affect profits.

The weaker the retail sales, the weaker the economy becomes. Performing due diligence means thoroughly checking the financials of a potential financial decision. Fraudsters have technology on their side. Foreign agents or finders are not identified. April 11, 2017 Suhail Karim Beg, Business Development Specialist, Office of ... the first thing you should do to protect yourself against non-payment risk is speak with an EXIM Bank Trade Finance Specialist on obtaining one of our affordable export credit insurance policies. Bills of Lading may be altered or falsified by exporters or freight forwarders or may otherwise reflect the legitimate shipment of products - just not those guaranteed by EXIM Bank. Commercial invoices are inflated to generate cash back for the borrower, cover the lack of any required down payment received by the exporter, or create a disparity between lesser valued goods shipped and cash for all parties.

Several consecutive quarters of downward-trending revenue can spell doom for a company.

Red flags usually appear consistently in reports for several consecutive quarters, but a good rule of thumb is to examine three years' worth of reports to make an informed investment decision. A red flag is a warning or indicator, suggesting that there is a potential problem or threat with a company's stock, financial statements, or news reports.

A red flag is a warning or indicator, suggesting that there is a potential problem or threat with a company's stock, financial statements, or news reports. Gaining a solid understanding of and being able to read financial statements helps ensure success when investing. Rising accounts receivables and high inventories may mean a company is having trouble selling its products or services. Discrepancy waivers, reassignment of proceeds, or requests for reimbursement may be warning signs within Letters of Credit. When a company takes on more debt without adding value to the business, the debt-to-equity ratio could rise above 100%.

High debt-to-equity ratios raise red flags for investors.

The perception may be that the company is not performing well and is too risky an investment since more creditors finance operations than investors. Assignment of proceeds granted to third-parties not previously mentioned in the application.

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