All businesses want to trade and sell as much as possible, but each sale costs money and therefore SMEs often require trade finance to help plug the cash flow gap and allow them to make the most of all the opportunities available.
Trade finance is a form of business funding designed to facilitate international trade. It can sometimes be referred to under different guises such as:supply chain finance, import finance, export finance, invoice discounting, purchase order finance and inventory finance..
Depending on what form of finance you chose to bankroll your company’s trade, you might use a bank, an alternative lender, a specialist export finance firm or a cash flow finance fintech provider.
International Trade Finance
Although the term trade finance can be used to describe any business financing arrangement directly intended to facilitate trade between two parties, it most often refers to international financing.
Depending on which side of the trade your business is on, this might also be called export finance: but trade finance is equally useful to businesses that want to make savings by sourcing their supplies from abroad, or even by shifting their manufacturing overseas.
Buying foreign-manufactured goods has significant cash flow impact on a business, and SMEs in particular may struggle to pay their foreign suppliers on time and then wait several months to turn those supplies into sales which are only then invoiced and eventually paid – as much as 180 days after making the initial down-payment to the factory.
On the flip side, selling abroad comes with enhanced risks and the possibility of having to collect debts in unfamiliar jurisdictions: export insurance, export finance and government export guarantee schemes can help with this.
Smart Trade Finance
Whichever way your trade is flowing, even a well-funded business will usually want to have specific financing in place, to ensure that large trade deals aren’t too much of a drain on its working capital. That way the business remains ready to seize further opportunities as they present themselves.
Specialist financing solutions such as purchase order financing and letters of credit are designed to help businesses meet the upfront costs of outsourced manufacturing. However, even these leave a significant cash flow gap after shipping, duties and taxes have been paid.
Thanks to fintech, businesses can now build their own tailored smart funding solutions. For example, cash flow finance (in the form of invoice finance or debtor finance) can run alongside specialist? import or export financing solutions to cut out the final wait for payment. With cover also in place for the initial costs, such a system brings the cash flow impact down to manageable proportions.
Sophisticated, smart business funding solutions such as these are what TIM specialises in. TIM’s sales solutions staff can build a tailored funding package for most trading businesses. These solutions will actually enhance cash flow while offering great value trade finance so businesses can make the most of their opportunities and enjoy healthy, profitable growth.
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TIM Finance offers several different funding solutions (Services), one or more of which has a no-fee, no interest and no long lock in contract period, called the Fully Flexible funding option. Conditions, fees and charges apply to some of the Services provided, which may change or we may introduce new ones in the future. Full details for all funding options (Services) including any fees and charges which may apply, is available on request. Lending criteria apply to approval of credit products. This information does not take your personal objectives, circumstances or needs into account. Consider it’s appropriateness to these factors before acting on it. Read the funding agreements provided, for your selected product/service, including all the Terms and Conditions contained in agreements provided, before proceeding. *T&Cs: Minimum 12 month invoice funding contract with TIM Finance. Direct clients only, offer doesn’t apply to broker introduced clients. All standard credit terms and conditions apply including credit assessment. Not applicable to existing clients.