UKBA logo dark

Everything you need to know about trade finance

By Richard Olsen

Taking your products and services to a global market is key to unlocking your sales potential. However, it also places pressure on your cash flow, with your business left to foot the cost of supplies and administration required to import and export, prior to receiving payment from customers.

Trade finance is commonly used to fund trade, easing the cash flow pressure. 80-90% of world trade relies on it. It allows companies to take advantage of the global market – to sell to customers overseas or strengthen their supply chains – in an affordable way.

We have explained everything you need to know about trade finance and its impact on your business below.

How does trade finance work?

Trade finance is a form of loan that bridges the gap between supplier and customer. Often, companies experience delays in receiving payment from customers, making it difficult to secure the supplies needed to fulfil an order, and trade finance prevents this from threatening their cash flow.

All you need is an order from a customer either in the UK (for importing) or overseas (for exporting).

If you serve customers overseas, trade finance gives you the funding to buy your supplies to fulfil the order in the UK and send them abroad before receiving customer payment.

If you are serving domestic customers that require supplies from overseas, you may use the funding to acquire the materials you need to fulfil the order.

Trade finance boosts productivity and gives you a head start on your orders, allowing for faster turnaround times for your customers and ensuring your suppliers are paid promptly. Everyone wins.

Benefits of trade finance

Trade finance has multiple rewards if used correctly in your business. We’ve listed the most prominent below.

  1. It eases cash flow. One of the leading purposes of trade finance is to alleviate the impact on cash flow that importing and exporting often has. Using it will make the cost of trade more manageable while preventing negative implications to your company finances that could make it harder to operate.
  2. It maximises your sales potential. Once you have exhausted the domestic market, finding new audiences is vital. Targeting overseas customers will boost your sales volumes to benefit revenue and profit.
  3. It strengthens supply chains. It’s crucial to provide high-quality products and services. Often, you will require materials from other countries to improve quality and meet customer demand. You will secure the supplies you need by utilising imports while enjoying more choice and competition.
  4. It boosts productivity. By filling the gap between your suppliers and customers, you can work on your orders immediately. You will maximise productivity, so orders are sent out as soon as possible, allowing you to speed up delivery times to the delight of your customers.
  5. It reduces risk. There are risks associated with import and export. In the case of export, you often must send out goods before you receive payment. With import, your suppliers may be unwilling to send your materials until you pay, which leaves you out of pocket. Trade finance reduces the risk, making importing and exporting more appealing to SMEs.
  6. It fuels growth. Taking your business to a global marketplace is a vital way to grow. Trade finance makes doing so more accessible and can maximise revenue while easing cash flow as you expand. You have access to higher funding as your order numbers and sizes increase, so trade finance also grows alongside your business.
  7. There are limited costs involved. Trade funding typically has interest rates between 2.5% and 3.5% per 30 days. Larger orders may have lower interest costs. It’s a very cost-effective form of funding but does require healthy margins.
  8. It’s accessible. Almost any business can benefit from trade finance. You need to jump through a few hoops to secure it – but all you need to start with is an order in place. This makes it highly accessible compared to some other forms of funding.

What do I need?

Trade finance providers typically have minimal criteria you need to be eligible.

Firstly, you need an order from a customer based overseas or a domestic order you intend to fulfil using imported supplies.

As with any loan, the funding you borrow will need to be repaid. You must be able to afford the repayments. This means being confident you will receive customer payment for the order and having robust credit management procedures to chase up missed invoices. Often trade finance works hand in hand with invoice finance since as soon as you send the invoice to your customer you obtain funding and are able to pay off the trade invoice.

Finally, you need to work with a reliable trade finance provider. Fortunately, there are many options on the market today. Some forms of trade finance encompass stock and invoice finance, allowing you to find a deal that suits your needs.

Trade finance could be the perfect option if you are seeking a route to make the most of global markets while protecting your cash flow.

Call today to speak to one of the advisors, who will help you to understand the impact on your business, prepare for overseas trade and arrange the required funding.

Richard Olsen | UK Business Advisors (

Need advice & guidance?

We have advisors all over the UK. Get in touch today for expert guidance and support.