Revolving Trade Finance

Revolving Trade Finance

Revolving Trade Finance (RTF) is a novel and flexible idea for financing businesses which is growing in popularity in this country and is likely to make great inroads into traditional clearing bank debenture backed overdraft business over the next few years.

Part of the reason for the growth in popularity is because American backed heavyweight newcomers who have significant new business targets to achieve have joined the traditional lenders in the sector.

The principles behind RTF are that:

  • it incorporates finance based on security in at least debtors and stock (and often other assets),
  • it is revolving in nature – i.e. the borrower can increase or decrease borrowings as it wishes so long as the borrowing remains within the formula and overall facility limits,

The flexibility of RTF combined with freedom from arbitrary withdrawal makes the product very attractive although it is likely to appeal most to businesses with high stock levels or seasonal sales fluctuations and importers using letters of credit.