What is Trade Finance?

Trade Finance refers to a provider financing a confirmed order, a factor would finance the actual invoice (post delivery, or completion of service). A trade finance product will co-exists alongside an invoice finance facility (factoring or invoice discounting).

This is an ideal solution for companies that have potential for growth but lack the security required for more traditional finance facilities. Trade Finance bridges the gap between the purchase of goods and onward sale.

How does it work?

The solution provides the ability to issue documentary letters of credit on your behalf, provide direct supplier payments through documentary collections on D/P terms or issue a Supplier Undertaking (normally for UK companies issued under UK Law) against confirmed customer orders.

  • You receive a confirmed order from a creditworthy customer
  • You place the order with your supplier for the finished goods
  • The trade financier will pay up to 100% of the purchase price to your supplier on shipment against the documentary collection, on the supplier undertaking or issue a documentary letter of credit on your behalf as required
  • You deliver the goods and invoice your customer and send a copy of the invoice to the trade financier
  • Up to 85% of the total invoice value will then be released, the trade financier will retain the original monies paid to your supplier at the beginning of the transaction with the balance less fees returned to you.
  • Chase and collect payment from your customer and return any profits to you

How do you benefit?

Many businesses find their growth potential is stifled as they are unable to access the necessary funding required via more traditional business finance facilities to fund more orders and grow their business.

This Trade Finance provides a viable solution to the catch-22 situation where you have secured a customer order, but the funds you need to fulfil it are tied up in your business and you are unable to access those funds until the order has been delivered and customer payment received. The facility enables a business to take on additional business that would otherwise be lost.