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Trade Finance

Trade Finance

What are the types of Trade Finance?

Import & Export financing is the most common type of Trade Finance. In this case, a financial institution provides the required funding to cover the cost of imported/exported goods or services. The funds might be used to pay the costs of production, shipping, and insurance, in addition to raw supplies. Banks, import credit organisations, and other forms of financial institutions are all possible sources of import funding.

With export/import trade finance, businesses may profit from development and expansion into new markets. It is also effective for managing the risks involved with doing worldwide company.

The other common use of Trade Finance is to purchase raw materials, and pay for the costs of production in a domestic based business that has a drawn out sales cycle. An example of this, a builder using this product to purchase materials from a supplier and using them to complete the works required, before being paid. As there is a lengthy time between outlying their funds on materials and collecting final payment from the client, the cashgap can put pressure on the builder and inhibit them from taking on new projects.

What are the pros and cons?

Trade financing may be a terrific way to secure the money you need to build your company and expand into new markets, there are certain businesses that won’t benefit from using this product, we’ve included a few points to consider when making that decision:


    An improvement in the company's existing cash flow: trade financing may provide firms with funds in advance, even before the shipment of products. This may be helpful in improving cash flow and maintaining adequate amounts of working capital.

    It may help you manage your cash flow and safeguard your company from volatile market conditions.

    It may provide you with access to credit lines that you would not otherwise have.

    You may have the ability to expand their operations into new markets and increase the amount of money they bring in from existing ones. It is also possible to assist & improve cash flow by paying for items in advance.

    Bulk buying stock may attract discounts, but also opportunities to take on larger projects.


    With any type of business funding, you should be carefully considered before entering into. As you’re using someone else’s money to pay for goods, you will need to ensure you can pay it back.

    In some cases, it’s difficult to receive an approval, that’s why it’s imperative that you seek assistance from an experienced team.

    You may be required to put up collateral in order to get trade finance, which may put your business assets at risk if you are unable to repay the loan.

    There are several advantages and disadvantages to trade financing, it’s important that you speak with an expert to determine if this product will be suitable for your business. The team at SME Business Loans can help you understand this.

The types of trade finance available in Australia

In Australia, there is a diverse selection of options accessible, each of which comes with its own set of advantages and disadvantages. The following is a quick rundown of the most often sought-after choices:

1. Import/Export financing refers to a particular sort of credit that was developed to assist firms in meeting the costs associated with importing and exporting products. The cost of supplies, transportation, and any other charges related with international trade may be covered by the financing provided by our funding panel. This type financing isn't always easy to come by, but it's an alternative that may be helpful for companies who have significant sales in international markets.

2. Supplier finance is when a company uses a trade finance product to pay for raw materials upfront, rather than accepting the standard terms offered from their supplier (generally 30 days). The client is then able to pay this facility off over a period that spans up to 150 days. This type of product is specifically helpful for clients in construction, retail, manufacturing, FMCG and wholesaling, where business owners benefit from holding stock.

Listed below are a few considerations to keep in mind if you are considering applying for trade financing:

1. Ensure that you do sufficient research. Prior to deciding on a single service, it is necessary to explore and assess a variety of choices. Compare products, pricing, and terms and conditions from a number of sources, the easiest way to achieve this is through speaking with the team at SME Business Loans.

2. Be mindful of the necessities It is crucial to have a clear grasp of just what it is that you want from your trade finance facility before initiating conversations with potential providers. Ensure that you have a thorough understanding of your company's cash flow requirements and the kind of collateral you are willing to provide.

3. You should always be willing to negotiate. There has never been a better time to negotiate price and conditions, given that market competition is forcing margins to their lowest levels ever. Do not be reluctant to bargain with your supplier; you may be shocked at how much money you may save.

The challenges of accessing trade finance in Australia

The market for trade financing in Australia is now going through a phase of transition and consolidation. Businesses who are looking for access to trade financing are presented with possibilities as well as obstacles as a result of this.

On the one hand, in recent years there has been a decline in the number of banks that provide products related to trade financing, which has led to the exit of several major participants from the market completely. This has resulted in an environment that is more competitive, with the surviving banks being more eager to gain business. With this in mind, It’s now much more difficult to choose the best bank for one's company as there are now fewer alternatives to choose from. Also, it might be difficult to compare items and prices with one another on an equal footing.

As a result of the pressure that is being put on banks to lower their risk exposure, many of them are now requesting larger amounts of collateral from companies before they would grant a loan. As a result, gaining access to the necessary financing may be very difficult or even impossible.

The good news is that there are still lots of chances available for companies that are prepared to look around at their alternatives and evaluate them one by one. There are a variety of specialised trade financing providers available on the market that are prepared to assume a higher level of risk than the main banks.

Who can I talk to?

SME Business Loans Australia can help you evaluate your eligibility through our partner network. Get in touch today and we’ll check your eligibility free of charge. As our partner brokers are working with these products every day, they know the market well, and will ensure you are presented with the best possible option for your business.

Check your eligibility for a trade finance business loan.

Our partner brokers can help you find the best trade finance loan for you. Check your eligibility today!

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