Trade Finance and Invoice Finance solve 2 different cash flow gaps, at opposite ends of the same trade cycle.

Trade Finance is a working capital solution that pays your supplier on your behalf, so when you place an order you can cover the cost while the goods are being manufactured and delivered.

Invoice Finance unlocks the cash owed to your business but tied up in invoices you have already issued, so you are not waiting out another 30, 60 or 90 days of payment terms after the sale.

Used in combination, the 2 solutions can cover the full cycle from purchase order to customer payment, so your business has working capital available throughout.

Why do importers and wholesalers face a cash flow gap before stock even arrives?

If you import or sell wholesale physical goods, the dilemma is familiar. You need to pay upfront to secure the stock, but shipping and delivery can take weeks. Once the goods arrive and you sell them on, it can take weeks or months more before the invoice is settled and cash is flowing back in.

Trade Finance covers the first of those gaps. Overseas suppliers commonly want payment at the start of the trade deal, before you have received, let alone sold, a single unit. Trade Finance provides the funding to pay them, bridging the period between paying for goods, receiving them, selling them and turning them back into cash.

For your supplier, it means they can move ahead with manufacturing, packing and shipping without delay.

Trade Finance can help businesses looking to:

  • Buy raw materials or finished goods from overseas or domestic suppliers
  • Pay overseas and domestic suppliers
  • Access bulk or early payment discounts
  • Offer extended payment terms to their own customers

How does Invoice Finance close the gap after you have delivered to your customer?

Once your stock arrives, you can on-sell it to your customers. But market standard payment terms can mean the invoice you have issued sits unpaid for 30, 60 or even 90 days.

That is the second cash flow gap, and it can leave your business without the capital needed to meet payroll, fund operations and cover overheads. Invoice Finance provides advance access to the working capital owed to you before your customers pay.

Invoice Finance can provide:

  • Up to 85% of the value of eligible outstanding invoices upfront, with the balance once your customer pays, less applicable fees
  • Funding that can grow with your business
  • Funds in as little as 24 hours once your facility is approved and set up

What happens when you combine Trade Finance and Invoice Finance?

Most business finance solutions are designed to cover one cash flow gap. Combining Trade Finance and Invoice Finance can support your cash flow from one end of the trade cycle to the other.

Trade Finance funds the initial order by paying your supplier, without draining your own cash reserves. Invoice Finance funds the eventual sale by advancing the money owed to you, without waiting for customer payment terms to run their course.

Together, your business receives funding for both sides of the transaction.  

How do Trade Finance and Invoice Finance connect across a single trade cycle?

They are separate facilities, but they are not disconnected. Here is how they hand over to each other across one cycle.

1. Order your stock

You place your order with a manufacturer or supplier for the stock you need.

2. Trade Finance kicks in

Your Trade Finance facility provides funding to pay your supplier so production can begin.

3. Receive your goods

Trade Finance can provide funding for up to 150 days and up to 100% of the cost of goods, with repayment terms built around your trading cycle, so your own working capital stays free while you wait for delivery.

4. Sell to your customers

With cash flow intact, you deliver to your customers and raise an invoice.

5. Invoice Finance kicks in

Now you are waiting on payment rather than goods. Invoice Finance covers this second gap, providing advance access to the money owed to you ahead of your customer’s payment terms.

6. Receive your payment

Your customer pays, you receive the balance owed, and the business is ready to start the next trade cycle.

Frequently asked questions about Trade Finance and Invoice Finance

Do I need an Invoice Finance facility to access Trade Finance?

Usually, yes. ScotPac’s Trade Finance facility typically works alongside an Invoice Finance facility, so the 2 can operate as complementary solutions across your trade cycle.

If your business needs to fund supplier purchases but Invoice Finance is not the right fit, there may be other options available. A lending specialist can talk through which capital structure suits your business best.

How much of my invoice value can I access through Invoice Finance?

Businesses may be able to access up to 85% of the value of eligible outstanding invoices upfront. The balance follows once your customer has settled their account, less applicable fees.

Does my business qualify for Trade Finance and Invoice Finance?

Because the facilities usually operate together, your business will generally need to meet ScotPac’s Invoice Finance eligibility criteria:

  • B2B transactions: your company sells goods or services to other businesses on standard trade credit terms
  • Trading history: a minimum of 6 months in operation, with consistent invoicing and collections
  • Creditworthy debtors: your customers are creditworthy Australian businesses with a reliable payment history
  • Invoice value: your business generates a minimum of $10,000 in invoices per month
  • Australian operations: your business is registered and operates within Australia, with invoices issued in Australian dollars

Trade Finance generally requires at least 12 months of trading history. A lending specialist can confirm what applies to your business.

Can Trade Finance and Invoice Finance fund the same purchase order?

Yes, and that is the advantage of combining them. Trade Finance funds the payment to your supplier at the start of the cycle, and Invoice Finance funds you while your customer’s payment terms are still running.

What if my customer’s payment terms are longer than 30 days?

Invoice Finance is designed for exactly that. Once your facility is approved and set up, funds can be available in as little as 24 hours, so you do not have to wait for your customer’s full payment term to run out.

Is this combined structure only for importers?

No. Importers and wholesalers are common users, but the same pattern applies to any business that pays suppliers upfront and then invoices customers on standard trade terms. If that sounds like your business, it is worth a conversation.

Want to see how the 2 facilities could work together for your business? Get in touch with a lending specialist about funding your full trade cycle.

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