Export Finance in India: Benefits, Eligibility, and Application Process

India has one of the fastest-growing economies in the world, and is one of its top exporters. Because of the country's industrious nature, businesses must find cash to keep up with demand, boost growth, cover payroll, and develop new products.

India's manufacturing industry is dominated by small and medium-sized companies. Frequently, these same businesses have to look outside of their local bank for a loan in order to replenish their working capital.

Often, banking institutions choose to work with larger enterprises, leaving smaller ones fresh out of luck. According to a 2020 study by the Asian Development Bank, 45% of total loan applications submitted by MSMEs were rejected around the world. Many business owners in India still rely on informal credit, such as loans from family and friends, or loan sharks, to establish and grow their businesses.

Meanwhile, trade finance companies cater largely to small and medium-sized businesses and their cash-flow needs. Export finance is offered by specialized lenders as a way of generating cash from receivables that would otherwise not be paid.

Business owners who apply for bank loans must fill out reams of paperwork and meet a stringent set of lending criteria. This is bad news for small and medium enterprises, as their balance sheets and credit histories tend to be weaker than those of large corporations, driving banks away.

The trade finance industry is characterized by a more flexible approach to financing. Sleek application processes are used to present interested prospects with a simple process that is based on the creditworthiness of clients' buyers rather than their own financial standing. First-time borrowers who do not carry the expertise to compile and submit cumbersome loan documentation doubly benefit from this pared down process.

Furthermore, trade finance companies are uniquely positioned to fully comprehend the potential and viability of SMEs. Not only do they review documents more flexibly, but they also ensure that the basic minimum requirements for businesses are met, which makes it easier for them to secure financing. If these businesses were previously noncompliant, specialized trade finance lenders educate and nurture them until they become compliant, at which point financing is then provided.

Export finance is different from traditional loans because it does not have to be repaid. This is particularly important for smaller businesses with tight cash flows. In addition, collateral is not required to secure this type of financing. When they all come together, these factors reduce the burden of any added financial obligation on a business.

While earlier-generation companies were unable to handle international risks, export financing allows them to use their own receivables to grow, as well as protect against bad debts.

International trade financing firms like Tradewind Finance ensure that financial statements are maintained, certificates are obtained, and bookkeeping/ledger keeping is done with full records, creating a complete history and enabling businesses to obtain further funding, appeal to new buyers, and focus on core business growth.

As the government strives to reach a $5 trillion economy in five years, international trade finance firms like Tradewind are helping exporters reach their wider goals.