How Can I Use Trade Finance to Grow My Business?

To grow a business built upon a global supply chain requires enough liquidity to meet the cash demands of a lot of moving parts. Unfortunately, for most businesses, achieving a comfortable level of liquidity is often out of reach. The necessary capital required to grow is already tied up for funding new inventory currently in production or locked in the queue of invoices waiting to be paid under lengthy retailer payment terms.

Traditional financing options can be hard to obtain or may not be able to meet the demands of those participating in global supply chains. By meeting the unique financing needs of businesses like yours, international trade finance companies can serve as catalysts for business growth.

Regardless of where your company fits within a particular supply chain, there are companies that offer import and export financing solutions that are specifically designed to help you grow. Below, learn about situations illustrating how trade finance is helping today’s companies.    

Vendor Financing

Your brand or retail company is taking off, the demand for your product is rapidly increasing, and depleted inventory levels are predicted in the coming months.

As great as your growth has been, available cash on hand will not be enough to place the volume of orders necessary to meet demand. To add to the financial burden, your overseas suppliers require payment before shipment.

You may not be eligible for a bank loan or the loan you obtain may not be sufficient. Trade finance companies can provide a significantly higher export and import finance facility that will allow you to optimize your working capital by providing solutions to you and your upstream and downstream partners. For instance, your suppliers can benefit from an on-demand pool of liquidity, lower borrowing costs, faster funding, and a higher advance rate.

Export Financing

The competition for new retail channels is fierce. Your product is popular but the demand fluctuates throughout the year and your retailers find themselves having to reduce prices during the slower times of the year, lowering their profits.

Understanding this, your firm acquires a post-shipment finance facility (same as an export factoring facility). The facility can be used to offer extended payment terms to your best retailers. In doing so, your retailers have a longer sales window to capture profits while your business is able to maintain liquidity. 

Inventory Financing

As a wholesaler, your business may see improved sales year after year. Part of your growth is attributed to the longer payment terms you extend to your retailers. However, stretching your cash reserves under these terms is also making it increasingly difficult to keep up with new orders. 

Reducing your payment terms in not an option as you don’t want to take the risk that your retailers look for new suppliers. Provided that you are dealing in goods that have a large and liquid market, import and export finance companies can arrange financing against your standing inventory. Inventory financing could be an easy way for you to start receiving consistent replenishment of working capital so your business can keep up with its growth trajectory without jeopardizing current relationships: a win-win that positions your company for success now and in the future.

Factoring  

Unlike traditional bank loans, international factoring companies like Tradewind, can solve short-term cash flow issues by purchasing your company’s account receivables in exchange for an advance on the majority of the total invoice value. The factoring firm then collects the full amount from your customer upon invoice maturity. Once the invoice is paid in full, you then receive the remaining balance. You no longer have to wait thirty to ninety days for customers to pay you.

Trade finance can provide off-balance sheet funding, as opposed to bank financing that is reflected as debt in your ledger. It not only bridges the funding gap but will also scale your funding in line with your sales. This would be an asset for any company looking to grab additional market share. Not only can trade finance fund growth, it can become your competitive advantage.

Currency Protection

With your suppliers and retailers located in more countries than ever before, international trade finance provides predictability in currency costs by managing the entire transaction. This is true whether trading between only two currencies or among many currencies across multiple continents.

Trade finance companies like Tradewind offer trade finance facilities in multiple currencies, eliminating upfront all risks resulting from currency exchange. Working with a trade finance company opens your business up to the global market and provides your business with greater speed and flexibility.

Growing Your Business

Capital is the oxygen essential for business growth. Without capital, businesses remain stagnant and allow competitors to take away market share. 

If your business is in need of capital to increase production, build inventory levels, or extend payment terms, seek out the benefits trade finance can provide your company. Making up 80 to 90 percent of all trade transactions, trade finance is truly the lubricant keeping today’s global economy growing.