What is trade finance?

A special kind of scale-up funding, trade finance funds are designed specifically to support the purchase and sale of goods between importers and exporters. It gives businesses the funds to expand their market beyond their borders.

Eligibility and exclusions

Trade finance is a broad term used to describe funding for many kinds of international business activity. Usually, businesses involved in international trade activities that have a reliable track record of trade transactions are eligible for a trade finance fund.

Benefits and scenarios

Trade finance helps you access additional funds to explore new markets abroad and trade at a global level. It opens your customer base wider as well.

International trade finance has the advantage of having a lower information requirement, as it relies on the strength of the transaction. Trade finance gives you access to working capital that might have been tied up in goods still yet to arrive from abroad.

Risks

Trade finance can be an expensive form of financing. This is because there is a higher risk involved for the lender.

There’s a chance that the businesses you deal with overseas will default on payments, which could have a negative effect on your business.

It can also be a complex means of finance as it can involve a range of differing financial instruments, like letters of credit.

Things you can use to secure the finance

To secure trade finance, you usually need evidence that your business has international operations and is in a sound financial position. Having a record of trusted suppliers and customers, and consistent trade patterns, will improve your chances of securing access to trade finance.