What is a Trade Finance?
A trade finance limit is just opposite to an Invoice finance or Debtor finance limit.
A Trade finance limit enables you to pay your supplier upfront or in advance before receiving goods.
You can get up to 100% of your supplier’s invoice funded and have flexibility to repay up to 150 days term.
A trade finance is also called as supplier finance.
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Critical Information Sheet
|Loan Amount||$100k- $150M|
|Can be used for||
|Repayments||Gets settled against payment of invoices within 60-90 days|
|Security||Secured against current assets of the business No real estate security required|
|Pre-Approval Time||24 hours – 72 hours|
|Unconditional Approval and Settlement Time||7-10 days|
|Interest Rates||Starts from 4.95% p.a.|
Why does a business need Trade finance?
Generally, businesses who are heavily reliant on domestic or international suppliers, needs to have access surplus cash flow to procure timely orders.
Having a trade finance limit enables a business to make prompt payment or advance payment to the supplier which gives them the buying power to negotiate better pricing with discounts and timely delivery.
With a Trade finance limit, you get an option to pay back the lender up to 150 days which is a good time fame to liquidate the orders, payback the lenders and book profits.
How does a Trade Finance work?
What are the benefits of having a Trade Finance limit?
What documents are required to apply for a Trade Finance?
Why does a company need trade finance?
A trade finance facility may not be a suitable option for every business. However, it could be very useful for businesses involved in import and export of goods and services. A trade finance facility can be beneficial for both buyers and sellers.
For a buyer, generally paying for goods in advance becomes a big burden on the cash flow of the business and could witness several delays in procuring goods which can eventually impact the overall growth of the business. Having a trade finance facility helps them in making advance payment for goods to be imported and procure timely orders.
For a seller, exporting goods without receiving 100% advance may pose severe risk of default and hence they may not be comfortable dispatching the goods without receiving the full payment. A trade finance enables them to unlock cash flow from the manufactured goods in a much quicker time.
A trade finance facility not only helps to solve the liquidity problem for both buyers and sellers but also mitigates the risk in transactions involved in import/export of the goods between domestic and international trades.