Any trading business which sources goods from UK or overseas suppliers could have a need for trade finance.

Typical Conditions

  • A UK SME which trades in goods which are appropriate for trade finance – ideally finished items with a high margin, not susceptible to price fluctuations (eg no commodities) with confirmed orders or a clear sales history
  • A lack of funding from traditional sources – a widespread problem in the age of the credit crunch where bank funding is severely limited
  • Grown rapidly and your credit capacity cannot meet the order book
  • Experience highly seasonal fluctuations in demand and need working capital over a short timeframe
  • Trade one off or opportunistic transactions that need a flexible and creative structure
  • Have a short trading history so can’t get credit from suppliers

Typical Products

So what does trade finance mean? It refers to various types of facilities that allow businesses to fund their trades.  It is front end financing and can include:

  • Loans
  • Paying Suppliers Direct
  • Letters of Credit

The financing is bespoke to the individual production, delivery and payment cycle of each trade – it can be for one off deals or on a revolving basis, with a simple example illustrated below:

Trade Finance

  1. Customer places order with UK trading company (a “Tradeco”)
  2. Tradeco sources a supplier to fulfil the order
  3. Tradeco secures trade finance to pay supplier
  4. Trade finance house either provides a loan to Tradeco, makes payment to the supplier or provides guarantees such as a letter of credit
  5. The supplier delivers the goods
  6. The customer pays Tradeco for the goods
  7. Tradeco fulfils the order
  8. Tradeco settles the trade finance facility / the guarantee expires

Each trade is unique so one cannot be too prescriptive in the criteria for such financing solutions – we are flexible and creative, so please do contact us to see if we can structure a solution to meet your requirements.