In the preceding chapter foreign exchange was considered in its application to all forms of international business such as shipment of goods, sale of securities, and payment of services. In this chapter attention will be given only to the methods of financing the export and import of goods.

The financing of foreign trade is a problem difficult for both merchants and bankers because of their inability to determine the credit standing of foreign buyers. It is practically impossible to secure information from these firms themselves, since the use of the credit statement is little known outside the United States. The necessary facts must be gathered by indirect means. In this work, correspondent banks and branch offices are called upon to express their judgment, but these responses generally furnish little information, for they are based on personal opinions rather than on credit files. The general mercantile agencies, as Dun and Bradstreet, have extended their organizations to foreign fields and are developing a credit service similar to that established in the United States. Because of difference in nationality, local feeling against supplying information, and distance between the two countries, very little knowledge can be gathered about the credit standing of the merchant.

This lack of credit information concerning commercial houses vitally affects the nature of foreign trade financing, and differentiates it from the procedure used in domestic commerce. In the first place, banking institutions are relatively more important in international trade, for it is necessary to use their better-known credit in place of the limited standing of the commercial houses in order to induce sellers to part with their goods.