Trade finance may sound like something only offered to the big multinational companies trading millions of pounds of goods, but in actual fact small business trade finance is an increasingly popular, and useful, way to grow your company. Trade finance is a means of buying goods (to trade) when you cannot get terms from the supplier. Here are some questions about trade finance answered.

1. What is Purchase Finance?

This is a popular form of trade finance where you receive credit when you want to make an order with a supplier. The trade finance provider pays the supplier for the goods you order. You get credit terms within which time you receive the goods and settle the invoice. Then you repay the credit.

2. What is Supply Chain Finance?

Supply chain finance is a means of extending the finance options available under a trade finance agreement. When you have confirmed orders for the goods that you have bought under the trade finance agreement you allow a finance company to take control of the entire supply chain, from purchasing the product through to collecting the money. You also get ledger management services. As you would expect, this is a more thorough and comprehensive product that is available for businesses with a supply of confirmed orders for goods.

3. How Does Trade Finance Work?

One of the problems small businesses have is finding the money to survive between buying the goods and waiting for payment from the client. Trade finance bridges this gap in cash flow and allows for a more streamlined cash management process. You can set up more lucrative deals and take advantage of being able to buy the goods you need at the terms you need, even when you do not have all the money available in your hands at the time. Once your invoice has been paid you repay the finance and add on the fees charged by the trade finance provider.

4. What are the Benefits of Small Business Trade Finance?

The main reason small businesses take out trade finance agreements is that it allows them to afford deals that are otherwise out of reach. More lucrative deals can be formulated, without the worry of being unable to deliver to clients. The terms you can negotiate often work out to be better than the fees you have to pay to the provider. If needed, an agreement can be brokered where the provider takes care of the entire supply chain and ensures that the process of supply chain management is smooth and hassle-free. Many businesses need this facility, particularly when they are just getting started. In all cases, it is important to choose a reliable and professional finance provider in order to ensure that you get the best deal and that it meets your company’s needs.

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