Trade Finance

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Trade Finance also known as transactional finance provides companies with the funds to pay suppliers for the purchase of finished goods. When there is the need for a product and secure orders against the products required then trade finance can bridge the funding gap between purchasing the goods and the final sale to a customer of your business.

There are effectively two types of trade finance – Purchase Finance and Letters of Credit.

Purchase Finance

This is short term funding against a confirmed customer order. It is usually available for:

• Importers / traders looking to source and supply goods within a short time period
• Finished, identifiable goods which are non perishable
• Businesses with experience in their trade
• Predominantly for goods with high gross profit margins

Advantages of this funding are:

• 100% finance (plus duty and VAT) can be provided
• The trade financier relies on the strength of the transaction for security
• It doesn’t affect existing funding lines

Letters of Credit

Letters of Credit are used to guarantee payment to the supplier in order to obtain the release of goods.

They are available to importers and wholesalers that satisfy the following criteria:

• Where there is a written purchase order for the goods
• The purchaser can be underwritten, or credit insurance is available
• Finished, identifiable goods which are non perishable
• Businesses with experience in their trade
• Predominantly for goods with high gross profit margins

Advantages of this funding are:

• The forward order book can be turned into cash, rather than miss an opportunity
• 100% finance (plus duty and VAT) can be provided
• The trade financier relies on the strength of the transaction, the order and the quality of the ultimate purchaser
• The letters of credit do not affect existing funding lines