That is, you can fund your National or International trade, also known as export finance or import finance.
There are various types of trade finance solutions that can be structured:
Finance is made available for the client to pay for the goods (works like an overdraft). The lender will advance a % against the existing stock. Structured trade finance is where payment is made by the trade finance company directly to the supplier of the goods. This can be used for domestic purchases or for imports (import finance).
The trade finance company will either offer you a period of time to repay the amount borrowed, or will use another facility, such as a debtor finance facility to repay the amount borrowed for the stock. The client can choose 30/60/90/120 day terms to repay the debt to the lender at the time of the payment.
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:
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.
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Debtor Finance (Factoring) can offer you an alternative solution by providing your business with cash, by allowing you to raise finance from the unpaid invoices owed to you.
This immediate flow of cash against the value of your outstanding invoices can help improve your immediate business prospects and allow it to grow.
Your outstanding sales invoices could be your largest asset with up to one quarter of your business's overall yearly turnover remaining unpaid at any one time.
This "locked up" cash can greatly impact the growth potential of your business and has been known to force some small business' into insolvency.
Factoring is the fastest growing form of commercial finance in Australia and is used mainly for working capital. Compared with the traditional overdraft style bank funding, there is no set monetary limit and doesn't involve tying up the security value of your property.