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Trade Finance

Updated: 19th January 2007 (PM)

Trade Finance bridges the funding gap between purchasing goods and the final sale to your customer.There are effectively two types of trade finance %uFFFD Purchase Finance and Letters of Credit.

Purchase Finance

This is short term funding against a confirmed customer order. It is usually available for:

Importers / traders looking to source and supply goods within a short time period
Finished, identifiable goods which are non perishable
Businesses with experience in their trade
Predominantly for goods with high gross profit margins

Advantages of this funding are:

100% finance (plus duty and VAT) can be provided
The trade financier relies on the strength of the transaction for security
It doesn%uFFFDt affect existing funding lines

Letters of Credit

Letters of Credit are used to guarantee payment to the supplier in order to obtain the release of goods. They are available to importers and wholesalers that satisfy the following criteria:

Where there is a written purchase order for the goods
The purchaser can be underwritten, or credit insurance is available
Finished, identifiable goods which are non perishable
Businesses with experience in their trade
Predominantly for goods with high gross profit margins

Advantages of this funding are:

The forward order book can be turned into cash, rather than miss an opportunity
100% finance (plus duty and VAT) can be provided
The trade financier relies on the strength of the transaction, the order and the quality of the ultimate purchaser
The letters of credit do not affect existing funding lines