Updated on 24th July 2026

Trade Finance bridges the gap between paying a supplier and being paid by a customer. For Australian small and medium sized enterprises (SME) involved in importing, wholesale, or manufacturing, understanding exactly how it works – from enquiry through to repayment – is the first step toward using it effectively.

This article covers the mechanics of Trade Finance step by step. For a broader introduction to what Trade Finance is, read our guide to Trade Finance for Australian businesses first.

What problem does Trade Finance solve for Australian businesses?

The core issue is a timing mismatch: cash outflow precedes cash inflow. A business needs to pay for stock or materials before it can generate revenue from selling them.

Consider a wholesale food distributor based in Melbourne. Their Thai supplier requires payment within 30 days of the purchase order. Retail customers pay on 60-day  terms. Add 30 to 45 days for shipping and customs clearance, and the business is potentially out of pocket for 90 to 120 days per order cycle.

On a $200,000 order, that is $200,000 of working capital tied up in transit – unavailable for wages, overheads, or the next purchase order.

As demand grows, the problem compounds. A new retail customer wants to place a large order on 60-day terms. The supplier wants payment now. Without a funding solution in place, the business cannot accept the order – not because the opportunity is not there, but because the cash timing does not work.

Trade Finance solves the timing problem. It funds the supplier payment today, allowing the business to receive goods, sell them, collect from customers, and repay the facility – in that order.

How does Trade Finance work step by step?

Here is how the ScotPac Trade Finance process works for an Australian SME, from first contact through to repayment.

Step 1: Enquire with ScotPac.  Contact ScotPac by phone or online. A lending specialist will ask about the business, its suppliers, the type of goods, order size, and the typical sales cycle. This is a conversation, not a form-filling exercise.

Step 2: ScotPac assesses the facility.  ScotPac reviews the business and sets up a Trade Finance facility. Approval is typically available within 5 business days for an initial facility. The facility size, payment method (TT, Letter of Credit, or Documents Against Payment), term, and currency are agreed at this stage.

Step 3: The purchase order is placed.  Once the facility is live, the business confirms its purchase order. ScotPac pays the supplier directly, in the currency they require.

Step 4: The supplier ships the goods.  Depending on the payment method, the supplier may need to provide shipping documents before or after payment is released. Documents Against Payment requires proof of shipment; a Telegraphic Transfer may be paid on order confirmation.

Step 5: Goods arrive and are sold.  Stock lands, clears customs, and reaches the warehouse or customers. Business operations continue as normal – ScotPac has covered the gap.

Step 6: Customers pay.  Payment terms play out as normal. Customers settle their invoices.

Step 7: ScotPac is repaid.  The Trade Finance facility is repaid from customer receipts. The facility then resets – ready to fund the next order. Because it is revolving, it grows and contracts with actual trading activity.

Terms are available in 30, 60, 90 or 120 day increments from the date payment is made. The Trade Finance product can fund for up to 150 days. A ScotPac specialist will confirm the right term for the business’s situation.

How does Trade Finance work for importers?

Most ScotPac Trade Finance clients are importers. The practical flow for an Australian importing business:

  1. The overseas or domestic supplier requires payment before or shortly after shipment
  2. ScotPac funds the payment via TT, Letter of Credit, or Documents Against Payment
  3. Goods ship and arrive in Australia
  4. Goods are sold to Australian customers
  5. Customers pay on agreed terms
  6. The ScotPac facility is repaid

For businesses importing from China or elsewhere in Asia, ScotPac has a distinct advantage: Trade Finance advisors based in Guangzhou, China who understand local banking practices, supplier relationships, and documentation requirements. That on-the-ground presence matters when situations require hands-on expertise.

What payment method does ScotPac use to pay a supplier?

ScotPac supports three payment methods:

Telegraphic Transfer (TT): A direct electronic payment to the supplier’s bank account. Fast and simple. Best for established supplier relationships where trust is in place. The most common method used.

Letter of Credit (LC): Payment is guaranteed by ScotPac but only releases when the supplier meets specific conditions – typically proof of shipment with compliant documentation. Recommended for new supplier relationships or high-value transactions.

Documents Against Payment (DAP): Payment releases once the supplier presents shipping documents to ScotPac. The buyer gets documentary proof that goods are in transit before money leaves. Less complex than an LC, more protection than a TT.

How does Trade Finance work for exporters?

Exporters face the reverse timing problem. An overseas order has been accepted but payment will not arrive until goods are delivered – often 60 to 180 days after production, manufacturing, and shipping costs have been incurred.

For exporters, Trade Finance provides funding against the export transaction so orders can be fulfilled without waiting for the overseas buyer to pay. A Letter of Credit from the buyer’s bank can provide payment certainty once shipping obligations are met.

The appropriate structure for export situations varies depending on buyers, markets, and contract terms. Speak to a ScotPac specialist to discuss what suits the business.

What is the difference between a TT, a Letter of Credit, and Documents Against Payment?

A plain-English comparison of the three mechanisms:

TT – fastest, most trust required: ScotPac is instructed to pay the supplier. Funds transfer electronically with no conditions attached. Appropriate for established, trusted supplier relationships.

Letter of Credit – maximum protection, more setup: Payment is guaranteed but only releases when exact conditions are met. Both parties are protected. More time to set up, but the right tool for new supplier relationships or high-value transactions.

Documents Against Payment – practical middle ground: The supplier presents shipping documents to ScotPac. Payment releases once documents are received and verified. Proof that goods are in transit before money leaves.

Not sure which method suits the situation? ScotPac’s specialists will guide businesses through the options – it is part of the service.

How does Trade Finance work with Invoice Finance?

For many Australian SMEs, Trade Finance and Invoice Finance work most effectively together.

Trade Finance covers the purchase side: the supplier is paid, goods arrive, they are sold.

Invoice Finance covers the receivables side: instead of waiting 30 to 90 days for customers to pay, businesses can access up to 85% of the invoice value immediately. The remaining balance is released once the customer pays.

Together, they close the cash flow cycle completely:

  • Trade Finance pays the supplier on Day 1
  • Goods arrive and are sold on 60-day customer terms
  • Invoice Finance releases up to 85% of invoice value immediately
  • The customer pays on Day 60
  • Invoice Finance settles; Trade Finance facility resets for the next order

ScotPac’s Trade Finance facility is always operated in conjunction with an Invoice Finance facility. A ScotPac specialist will explain whether and how this applies to each business’s situation.

Used together, Trade Finance and Invoice Finance can eliminate the cash flow gap from supplier payment through to customer receipt. ScotPac calls this combination Supply Chain Finance, covering gaps of up to 180 days.

What do Australian SMEs need to qualify for Trade Finance?

How long does ScotPac Trade Finance approval take?

For an initial facility, approval is typically available within 5 business days. Once the facility is established, drawing down for subsequent orders is faster. ScotPac notes that funding approval can come through in as little as 24 hours for eligible businesses, subject to the terms of the credit arrangement.

Is a trading history required?

Yes. ScotPac’s Trade Finance facility requires at least 12 months of trading history. For newer businesses, ScotPac has other working capital solutions – speak to a specialist about what is available.

What does ScotPac consider when assessing a Trade Finance application?

ScotPac takes a commercial approach. The assessment looks at trading history, the nature of goods and suppliers, the customer base, and the structure of the order cycle. As a non-bank lender, ScotPac can be more flexible than a traditional bank – particularly for businesses in asset-light industries or those without a long credit history.

Real estate security is not required for Trade Finance. The facility is secured against the trade transaction itself.

Does the process differ for domestic versus international suppliers?

The core mechanics are the same. For international suppliers, TT and LC are common because cross-border currency transfers and documentary controls are needed. For domestic suppliers, payment is simpler – typically a direct AUD payment. ScotPac’s facility covers both, and many clients use it to fund goods purchased entirely within Australia.

How do Australian SMEs get started with ScotPac Trade Finance?

  • Apply online or call ScotPac on 1300 505 883
  • A lending specialist will make contact, typically within one business day
  • A conversation covers the business, its suppliers, and cash flow cycle
  • ScotPac outlines what a facility would look like for that specific situation
  • Once agreed, the facility is set up and ready to fund the next order

There is no obligation and no complex paperwork required to start the conversation.

Enquire about ScotPac Trade Finance here or call 1300 505 883.

Trade Finance Frequently Asked Questions

Can Trade Finance be used for goods that have not been pre-sold?

Yes. ScotPac’s Trade Finance facility can be used to replenish warehouse stock or fund raw materials for manufacturing. Goods do not need to be pre-sold before the facility is drawn. 

What currencies can ScotPac use to pay a supplier?

ScotPac can pay suppliers in multiple currencies including AUD and USD. If a supplier requires a specific currency, this should be raised with a ScotPac specialist when discussing the facility. 

How does a Letter of Credit protect the buyer?

An LC is issued with specific conditions – for example, the supplier must present a bill of lading, commercial invoice, and certificate of origin before payment releases. If the supplier cannot produce compliant documents, payment does not go through. This protects the buyer from paying for goods that do not match the agreed specification or have not been shipped. 

Does ScotPac have expertise in the China market?

Yes. ScotPac has Trade Finance advisors based in Guangzhou, China, specifically to support Australian businesses trading with Chinese suppliers. This on-the-ground presence means ScotPac understands local banking practices, documentation norms, and supplier dynamics in a way that most Australian lenders do not. 

What happens if a customer pays late and the facility cannot be repaid on time?

The right course of action is to contact a ScotPac relationship manager immediately. ScotPac is known for working with clients through difficult periods and has considerably more flexibility to restructure or extend terms than a traditional bank. Acting early gives the most options. 

How is Trade Finance different from Supply Chain Finance?

Supply Chain Finance combines Trade Finance and Invoice Finance to cover the full cycle from supplier payment to customer receipt – up to 180 days in total. Trade Finance on its own covers the purchasing leg. For businesses that need both ends funded, ScotPac can structure a full Supply Chain Finance solution. 

Is there a maximum facility size?

Speak to a ScotPac specialist – the right facility size depends on order values and the trading cycle. ScotPac works with businesses across a wide range of sizes, from SMEs through to large corporates.