Trade finance loan

Quick facts

If you’re a wholesaler, distributor or importer, a trade finance loan can give you the cash you need to buy inventory or stock from a supplier, in order to fulfil an order. It’s a form of working capital finance. It falls under the broader banner of trade finance.

If you have domestic customers, or some in Australia and some abroad – and if you’re importing or exporting – a trade finance loan (trade loan) could help you handle overseas transactions and costs.

Put simply, a trade finance loan can give you the cash you need to buy inventory or stock from a supplier, in order to fulfil an order. In this narrow definition of trade finance, it’s another form of working capital finance and has a lot in common with purchase order finance and supplier finance.

Let’s say you have a confirmed purchase order from a customer and you want to either import stock or inventory, or export products for resale. This is the point at which you’d talk to a trade finance lender. They would look at you favourably if both your customer and supplier were established businesses. Their loan would pay your supplier (in this case the exporter) before you (the importer) receive the goods. 

Goods can then be shipped to you more quickly so that you can fulfil your order. Your trade finance lender in other words acts as a third party to mitigate payment risk and supply risk.

A trade finance loan (trade loan) works like this: 

  • Your supplier invoices the trade finance lender for the shipped goods
  • Your customer then pays the trade finance lender
  • Finally the lender pays you the profits, minus fees.

The loan helps you close the payment gap at the beginning of your sales cycle. It can also work alongside any existing finance your business might have, like invoice factoring or asset finance.

Defining terms:

  • Some people refer to a trade finance loan as ‘trade finance’. For us, trade finance is a catch-all term for a much broader range of products and instruments designed for businesses who trade internationally. These include trade finance loans (as described here), invoice factoringsupplier finance and export finance. 
  • Because trade finance loans (or ‘trade finance’ if you are using the narrow definition) are based on purchase orders, they are sometimes referred to as purchase order finance or import finance. 
  • It’s easy to confuse a trade finance loan (or ‘trade finance’ if you are using the narrow definition) with supplier finance (or supply chain finance), because a trade finance loan helps you fund the beginning of your supply chain. However, supplier finance is actually a different type of business lending that buyers offer to their suppliers.

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Disclaimer: Swoop Finance Pty Ltd (ABN 52 644 513 333) helps Australian firms access business finance, working directly with firms and their trusted advisors. We are a credit broker and do not provide finance products ourselves. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Swoop Finance Pty Ltd can introduce applicants to a number of providers based on the applicants’ circumstances and creditworthiness, we may receive a commission or finder’s fee for effecting such introductions. Swoop Finance Pty Ltd does not provide any kind of advice and in giving you information about providers products, we are not making any suggestion or recommendation to you about a particular product. Offers of finance are subject to a separate assessment process by the provider and subject to their terms and conditions. If you feel you have a complaint, please read our complaints section which is contained within our terms and conditions.

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