With IWOCA estimating that 80% of the world now relies on trade finance, it’s important to know what the financial product is and if it’s right for your business. With this in mind, Think Business Loans outlines what you need to know about trade finance.
What is Trade Finance?
According to Trade Finance Global, ‘trade finance is a catch-all term for the financing of international trade’. Trade finance enabled importers and exporters to easily transact business through trade. A variety of parties are involved in trade finance, including banks, trade finance companies, insurers, importers, exporters and export credit agencies.
Some examples of trade finance products and services include:
- Letter of credit: This is a guarantee from the bank that the importer will receive the payment from the importer within a specified time
- A bank of guarantee: This is where a bank acts as a guarantor, promising to cover a loss if their customer fails to fulfil the terms and conditions of the contract
- Factoring: Factoring is a form of cashflow finance, where an exporter sells their invoices to a trade financer (the factor) at a cheaper rate. The exporter then sells this onto the importer, who pays full price for the product
- Forfaiting: This is when an exporter sells all of their accounts to a forfeiter at a discount in exchange for cash
- Export credit: This can be supplied to exporters as working capital
Why you should invest in Trade Finance
Trade finance is a simpler form of finance and less risky for importers and exporters to transact through trade. Trade finance can also introduce a third party, such as a bank, to cover a range of commercial finance products.
Think Business Loans is able to offer trade finance through the unsecured business loans provided by the 200 lenders on its panel. Whether you’re looking to boost your working capital or fund your import needs, we compare hundreds of lenders across the market to match your business the right lender based on your individual criteria.
As commercial lending experts, Think Business Loans understands that SME’s don’t have the time to scour the web for business loans. That’s why we aim to secure you the best financial product in 24 hours, so you can get the funding you need.
If you would like to know which unsecured business loan is right for you, contact our commercial lending managers today.
Jessica Court graduated from the University of Portsmouth in 2017 with a bachelor’s degree in Media Studies. She has previously worked within the In... Explore Author