Broadly, trade finance can support a business in several ways.
- firstly, trade finance enables lenders to provide finance secured against the goods being acquired and sometimes the borrowing business’s other assets. Repayment may be made from the accounts receivable generated by the client from sale of the goods bought with the assistance of the trade financier. For example, wholesalers of goods can use trade finance to facilitate the purchase of goods to enable them to fulfil purchase orders made by their own customers, with the finance to be repaid when the invoice raised to the customer is paid to the buyer; and
- secondly, financiers can advance funds against unpaid invoices for sales made by a business and give cash flow to enable that business to acquire more goods sooner than it could otherwise do if it had to wait for those invoices to be paid by its customers. This can take the form of invoice factoring or invoice discounting.
- thirdly, a business can obtain finance to secure its own supply chain (supply chain finance) by using finance to pay its critical suppliers early or to terms, before the buyers own receivables have been paid by its customers. Similar to factoring and invoice discounting this bridges the trade gap by financing the period between payment for goods from suppliers and receipt of payment for sale of those goods to customers.
Our team of experts at Francis Wilks & Jones are here to help you with any trade finance issues you might be facing or questions which need answering. Our knowledge of trade finance is very detailed and we have dealt with a wide range of trade finance enquiries. Our practical daily experience and legal expertise means that we can assist whatever the nature of your trade finance enquiry.