In simple terms, trade financing is a form of funding that takes care of advance supplier payments and enables business to fulfil client orders.
It also serves as an entry point into long-term relationships with international suppliers, helping to cultivate a sense of trust and understanding over time, According to Touch Financial, between 80% and 90% of global trade relies on this method of funding, and it has become increasingly popular in the wake of the great recession.
In order to access this type of funding, you may be best served by partnering with a trade finance broker. Here’s how you can leverage this resource to achieve your goals.
- Confirm your Order
Before approaching a trade finance broker, you’ll need to have received and confirmed the details of your purchase order. This should include your customers’ remuneration terms, and whether they’re adhering to a 30, 60 or 90-day repayment schedule.
This cannot be a statement of purchase intent, as you cannot secure any kind of trade finance with a viable order that has been signed and approved by the appropriate stakeholders.
These details can then be uploaded to an online brokers’ site, which will then process this information and connect you with viable lenders that suit your unique business objectives.
- Meet your Potential Funders
At this stage, your brokerage service will connect you with viable financiers, while relaying their precise terms and expectations.
This will offer you a broad insight into your options across the length and breadth of the market, enabling you to select a service provider that best suits your needs. You may also want to liaise further with potential lenders, as it’s possible to negotiate the terms of your agreement once you begin to discuss the finer details.
You can also leverage funding for a range of different trade purposes through this type of resource, whether you’re looking to cover supplier costs or cover any early payment requests.
- Wait for the Transaction to be Completed Once Goods have been Sold
Once you’ve agreed financing terms with a potential lender, the funds are released to your chosen supplier. This enables you to fulfil a purchase order and press ahead with the sale of goods as agreed with your customer.
Once the goods have been formally sold and your customer has completed their own payment, you’ll use these funds to repay your lender and settle your own liability.
With this simple financing method, businesses of all shapes and sizes (and particularly SMEs) can negate a potential cash-flow shortage and optimise their early stage growth. This also creates a short-term cycle of manageable debt, which does not encumber your business and help to cultivate a positive credit score over time.