Trade finance
Are you an importer that receives goods from outside the UK? Reduce the risk of trading overseas and achieve your international goals by using trade finance.
What is trade finance?
Doing business with suppliers and customers overseas can give your company an international foothold and present an exciting growth opportunity.
But trading abroad has its frustrations – the main one being the time it takes for goods to be imported and exported. In this case, trade finance could provide you with cash upfront so you can pay suppliers overseas promptly.
That’s one example of how trade finance could be used. But trade finance is a broad term that covers different types of activities for businesses with international operations. The process involves several different parties, including the buyer, seller and the trade financier.
Trade finance can include the below:
-
Lending
A short-term cash loan so you can buy stock from an overseas supplier. -
Contract finance or invoice factoring
Where you are loaned money based on the value of outstanding invoices. -
Issuing letters of credit
A financial contract that guarantees a buyer's payment to a seller will be received on time and for the correct amount.
Who can use trade finance?
Trade finance could be considered if you are a:
- Wholesaler
- Supplier
- Importer
- Exporter
At Funding Guru, our trade finance solution is aimed at importers who receive goods and products from abroad.
It is particularly aimed at businesses who frequently encounter a funding gap between paying suppliers and being paid by customers. Trade finance removes doubt from transactions by guaranteeing payment and ensuring things keep moving.
Trade finance can be utilised whether most of your business takes place in the UK or overseas.
Thoughts from Matt
“Trade finance is very popular among our business customers with substantial sales and operations abroad. With the cost of living crisis putting pressure on businesses, it’s best to free up as much cash as you can.
Get money upfront so you can pay suppliers abroad promptly and receive your goods as quickly as possibly. Trade finance can keep your business on a firm financial footing and help you place the orders you need to keep your business growing.“
Matt Haycox
Founder and CEO, Funding Guru
How much can I borrow through trade finance?
At Funding Guru, we typically provide trade finance facilities of between £100,000 and £500,000. Contact us online today or speak to one of our dedicated advisers who can discuss your situation.
The benefits of borrowing through us is that we are transparent about our charges. Whenever you borrow money, you’ll have to pay interest. Our interest rates are competitive and we do not charge early repayment fees – we don’t think our customers should be penalised for paying back their loans early.
We make our funding decisions based on a combination of an applicant’s history and vision. This means you may still be eligible to borrow if your business has adverse credit but can demonstrate your vision backed up with a solid expansion strategy
What are the different types of trade finance?
A Funding Guru, we facilitate loans and finance for a number of reasons. Below we list the main types of trade finance we offer.
Contract finance
Contract finance gives you a cash lump sum to bridge the gap between taking an order and being paid. It keeps domestic or international contracts moving by ensuring neither party is out of the pocket during fulfilment.
Borrowing is secured against a specific contract or purchase order, rather than your entire ledger, giving you the flexibility to access working capital locked up in the transaction.
It can be used standalone, or as part of a wider suite of trade finance products.
Pros of contract finance:
Freeing up more money for working capital or to place more orders.
Payment to us is made after the contract is fulfilled and payment from the customer has been received.
Because this type of loan looks at the value of a particular contract or purchase order, a lender may place less emphasis on your firm’s trading history.
Import export finance
Import export finance can bridge the trading shortfall between goods being received overseas and you being paid. Sometimes it can be weeks before a customer overseas receives your goods and pays the sum owed to you.
We act as a third party to provide payment for goods as soon as the order has been dispatched. This keeps cash and goods flowing between importers and exporters, even if the logistics of international trade – things like currency payments and credit assessments – get in the way.
This assurance of payment allows relationships between importers and exporters to be cemented, helping you to build a solid global trade network.
Pros of import export finance:
By receiving cash more quickly, you can boost your working capital or offer more products
Payment to us is made after the contract is fulfilled and payment has been received.
Supply chain finance
Supply chain finance allows suppliers to be paid quickly, and buyers to lengthen their payment terms.
You may also hear this called supplier finance, receivables finance, or reverse factoring.
The focus with a supply chain finance arrangement is to build trust in global trade relationships. A supplier issues an invoice, then a third party such as Funding Guru steps in to pay the sum owed immediately.
The buyer settles the invoice with us at a later date, allowing you to delay the repayments or spread them over time.
Pros of supply chain finance:
Suppliers get paid promptly but businesses don’t immediately have to find the cash to pay the bill.
Payments are made promptly so you can get the order as soon as possible.
If you settle your supplier invoices quickly, you will build a favourable relationship that could secure you better terms in the future.
Buying in bulk upfront gives you a better opportunity to negotiate a discount.
Letters of credit
Letters of credit provide a guarantee from a financial provider that, once the required terms are met by a supplier, payment to them will be made promptly.
This guarantee keeps the international trade wheels moving by reassuring a supplier that they will receive payment for their goods, with the reliance on the finance provider being trustworthy rather than a potentially fledgling company.
Pros of letters of credit:
Establishing themselves in the world of international trading, thanks to the reliance on the trustworthiness of the lender.
Both companies trading internationally or in the UK are eligible to benefit from this type of finance, although more traditionally we see it used in cross-border import/export situations
Contact Us
At Funding Guru, we thrive on helping businesses achieve their full potential. Don’t be put off by any potential difficulty of trading abroad. Contact us online today or speak to one of our dedicated advisers. They will talk you through the different funding options to suit your business.