Any business which trades with other companies, whether domestically or overseas, could benefit from trade finance. It is a useful service which involves a lender forwarding the money for any given purchase order made by your business, and has a great many advantages when used effectively. Many businesses use brokers like Touch Financial to find the ideal lender, but it is still possible to find one independently. Here is an explanation of trade finance, as well as some of the benefits it offers as a service.
What is it?
Trade finance, which can also be referred to as purchase order financing, involves a lender forwarding your trading business the money it needs to pay a supplier for the materials to fulfil a customer order. Once the customer order has been fulfilled and paid, some of the profit then goes towards paying the lender back (as well as paying their fee).
It is an effective way of keeping business operations flowing, as it cuts out the waiting time between customers placing an order and receiving it.
Improved Cash Flow
This service allows you to greatly improve your cash flow, as you will be able to immediately pay your suppliers once the lender has forwarded you the necessary funds. With customers receiving their orders faster, you are also likely to receive your payments faster, meaning that money is flowing into the business more regularly.
As a result of your cash flow improving, you can finance more trades and ensure that your operations remain efficient and effective. This greatly helps to stimulate business growth, and could facilitate a growth in operations as well.
Improved Importer-Exporter Relationship
Another advantage of trade finance is that it allows the relationship between importers and exporters to blossom, given that it minimises the chances of payment delays, and speeds up the entire trading process.
Currency fluctuations can often cause complications when trading overseas, so being able to provide importers with the necessary money upfront can go a long way in helping to reduce overseas trading risks and smoothing out business operations/transactions.
Trade finance is something which any business struggling with cash flow/payment delays would do well to consider using. It can help you reach your business objectives faster, and thus achieve greater levels of growth. Be sure to do some further research on this service to assess whether it could be of use to your business.