Up to 100% of the purchase price of the goods or services
Usually 30 days to a year (this may also depend on whether you take out an invoice finance facility in addition to a trade finance loan)
Between 1.25% and 3% per 30 days (more if you also take on invoice finance)
To fund your trade cycle i.e. to bridge the gap between placing your orders with suppliers and receiving payment from your customers
Wholesalers, distributors and importers
If you’re a wholesaler, distributor or importer, a trade finance loan can give you the cash you need to buy inventory or stock from a supplier, in order to fulfil an order. It’s a form of working capital finance. It falls under the broader banner of trade finance.
If you have domestic customers, or some in the UK and some abroad – and if you’re importing or exporting – a trade finance loan (trade loan) could help you handle overseas transactions and costs.
Put simply, a trade finance loan can give you the cash you need to buy inventory or stock from a supplier, in order to fulfil an order. In this narrow definition of trade finance, it’s another form of working capital finance and has a lot in common with purchase order finance and supplier finance.
Let’s say you have a confirmed purchase order from a customer and you want to either import stock or inventory, or export products for resale. This is the point at which you’d talk to a trade finance lender. They would look at you favourably if both your customer and supplier were established businesses. Their loan would pay your supplier (in this case the exporter) before you (the importer) receive the goods.
Goods can then be shipped to you more quickly so that you can fulfil your order. Your trade finance lender in other words acts as a third party to mitigate payment risk and supply risk.
A trade finance loan (trade loan) works like this:
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