How Can Trade Finance Help Your Business Grow?

For many businesses, there is often a gap between paying your suppliers for business items and receiving payment from your customers. Often, suppliers require prompt payment too as they need to pay their suppliers so are rarely flexible on invoice dates or credit facilities. However, when you don’t have the capital from your customers, how can you pay your suppliers and maintain a positive working relationship? The answer may be in trade finance.

What Is Trade Finance?

Trade finance is a financial product that helps you to fill the funding gap you may face between paying your suppliers and receiving payment from your clients. As suppliers very rarely offer the length of credit you need, especially for companies who import from overseas, then cash flow can suffer. However, trade finance works by paying your suppliers directly. You then pay the trade finance provider once you receive payment from orders placed by customers.

How Does Trade Finance Work?

With trade finance, you continue to deal and order from your suppliers directly. However, once the shipping documentation is received, the lender will step in and pay the supplier, often 100% of the purchase price. Your suppliers will continue to ship to your business or customers, andthen you repay the provider at an agreed time.

Providers may choose to use a monthly invoice system or will have a set payback date based on the specific transaction such as within 90 days of paying the supplier. Some lenders will have specific charges for the use of trade finance. Alternatively, they may charge interest.

How Can Trade Finance Help To Grow Your Business?

  1. Reduce the pressure on cash flow

With suppliers paid, you do not have to worry about the burden on your cash flow and can continue to invest in your business to achieve growth. Having cash flow available reduces the pressure you may face for any unexpected costs that may crop up and ensures peace of mind for your team too.

  1. Increase Your Orders

By having a provider to manage paying your suppliers, you may be able to afford to increase your supplies, enabling you to take on more orders and expand your client base. Instead, of selling out, you can make sure you have the products available to keep up with demand, even if you do not have the immediate funds to pay for them.

  1. Flexibility

You only need to use trade finance as and when you need to access funding. This means you may choose to use it once or regularly, but you do not have to use trade finance for every supplier or every order. You simplyhave the facility available when cash flow is poor making it incredibly flexible.

  1. Smooth business operation

The gap between paying suppliers and receiving customer payments can be challenging for every business. When you focus on managing your cash flow, you do not leave yourself time to focus on growing your business. When cash flow is covered through trade finance, you can focus on the more important aspect of running your business and achieving successful growth.

Looking To Grow Your Business With Trade Finance?

If you want to learn more about trade finance and whether it is right for your business, get in touch with the Funding Bay team who can help you to find the best business finance solution for your needs.


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