Trade funding

As we source overseas suppliers and open up new markets for their products, the importance of the cash flow cannot be underestimated. Companies are looking beyond traditional banks. Institutions that will utilize creative financing methods for trade funding to be provided.

Businesses can offer customer discounts or extend credit terms which in turn will create a competitive advantage for their company. Businesses cannot support their suppliers and wait for customer payments from across the globe whilst looking after every day operations. Import Export companies entering trade agreements with countries like China or India, need to manage these relationships without leaving themselves cash poor for their daily operational costs. Trade funding is better and less expensive way of financing import export transactions.

Companies continue to source out suppliers from the traditional areas such as the Far East, but not ignoring new markets such as Poland, Turkey and Eastern Europe which offer a lower cost base alternative and faster access to finished goods. The problem many businesses face is that local banks will not provide trade funding against bills of exchange, letters of credit and trade documentation.

Companies expanding into new countries need to make sure the banks in that respective country are financially sound. The problem is their corresponding bank network can be very limited. This could have an overall negative impact on the transaction. Businesses that look to trade funding will have to review the banks’ network in order for their suppliers and customers to use the right bank.

Trade finance services can be tailor-made to individual business requirements resulting in enhanced financial management and improved cash flow. For example, by raising finance against documentary credits – companies may be able to benefit from funds being released immediately. With Import Documentary Credit advances, it may be possible to negotiate discounts from suppliers which can help improve gross margin for the business. For an established import/export business, a trade funding solution could provide a low cost non-recourse fixed rate form of finance along with enhanced sales opportunities.