The last few months has seen supply chain disruption, freight costs spiking and general pressure on exporting/importing.

For an Australian SME importer, whether it’s container shortage fuel surcharges, the real issue is the cash flow gap that is created when overseas suppliers want payments before you even get a chance to on sell the goods and product.

That’s why more and more SMEs are turning to ScotPac’s Trade Finance as a solution.

Why Are Rising Freight Costs Putting Australian Importers’ Cash Flow Under Pressure?

Every dollar that is tied up in paying a supplier early is a dollar that is unavailable for your next order or wages for your staff.

This is where Trade Finance comes in.

A Trade Finance facility from ScotPac allows SME importers to access the working capital needed to pay suppliers as soon as goods are shipped. It then spreads repayment across the time period it takes for that stock to arrive, be sold, and cash to flow into the business. In other words, it prevents freight volatility from disrupting you supply chain.

And because a ScotPac Trade Finance facility is paired with an Invoice Finance facility, you also get working capital from your unpaid sales invoices, allowing you to cover both the buying and selling side of your supply chain.

How to Understand the Impact of Rising Freight Costs?

When container rates and surcharges become unpredictable, the volatility in price hits your cash flow long before it shows up on your balance sheet.

  • Spot freight rates can double or triple within weeks during disruptions to ports or shipping routes.
  • Suppliers increasingly demand payment in advance or on shipment, rather than extending open account terms, due to the increased risk.
  • Fuel and peak-season surcharges add more costs to the base freight, increasing the capital needed before goods leave the dock.
  • Reroutes and delays stretch transit times, widening the delay between needing to pay suppliers and having stock to turn into revenue.

How Does a Trade Finance Facility Help You Pay Suppliers Before Freight Costs Eat Your Margin?

A ScotPac Trade Finance facility pays your supplier directly once goods are shipped. It allows you to remove the need to pull on cash reserves or take on high-interest debt.

ScotPac then provides 30, 60 or 90 days’ credit, giving you time to receive and sell stock before repaying. With Trade Finance, a freight surcharge or rate hike doesn’t have to delay an order.

Why Is Trade Finance Linked to an Invoice Finance Facility?

Trade Finance works best when it doesn’t operate alone. Paired with an Invoice Finance facility, the custom working capital solution effectively manages freight volatility.

Trade Finance:

  • Funds the buying side
  • Pays suppliers, and
  • Keeps goods keep moving

Invoice Finance:

  • Funds the selling side
  • Unlocks cash from unpaid invoices
  • Allows advance access to cash

Together they cover your business from order to collection.

Which Industries in Australia Feel Freight Cost Increases Hardest?

Businesses with high-volume, low margin import cycles tend to feel freight volatility first. Examples include:

  • Wholesale and distribution businesses importing stock for resale on tight margins
  • Manufacturers importing components, raw materials or machinery
  • Retail and FMCG (Fast-Moving Consumer Goods) businesses managing seasonal stock builds ahead of key trading periods
  • Building, construction and automotive parts importers reliant on consistent overseas supply

Trade finance is designed especially for businesses requiring ongoing import/export cash flow. In the event of unpredictable and volatile times, it can help with rising freight costs by funding supplier payments and covering gap in cash flow until the goods are received and sold.

What Do You Need to Qualify for a ScotPac Trade Finance Facility?

Eligibility is generally based on your trading relationships and receivables, rather than your credit score or access to property for security.

  • You may need a demonstrable trading history of at least six months, with consistent invoicing and supplier relationships
  • Creditworthy customers who can support the Invoice Finance side of the facility
  • Documentation of supplier terms, shipment values and expected delivery timing

If you answer yes to the following questions, Trade Finance might be right for you:

  • Are you looking to fund the purchase of goods or raw materials from overseas or domestic suppliers?
  • Do you need flexible payment terms and repayment periods aligned with your sales cycle?
  • Are you needing funding of up to 100% of the cost of goods?
  • Do you need expert support to navigate international trade, with access to local advisors in Australia?

Explore Trade Finance for your business today 

Explore ScotPac’s Trade Finance solutions to find out how much working capital your import business could unlock. 

Frequently Asked Questions About Trade Finance During Freight Cost Volatility

Can small businesses use Trade Finance for a single shipment?

Trade Finance does not necessarily need to be only for large import volumes. It can be structured around one large shipment or an ongoing import program, depending on your need.  

Does Trade Finance cover freight and insurance costs, or only the value of the goods?

Trade Finance primarily funds payment to your supplier for the goods. In most normal circumstances, freight, insurance and customs costs are usually managed separately. Make sure to discuss your specific needs with a lending specialist from ScotPac. 

How quickly can a Trade Finance facility be set up?

Turnaround depends on a number of factors such as provided documentation and whether you have an existing Invoice Finance arrangement, but is often faster than a traditional bank facility. If you have a time-sensitive shipment, make sure to let our lending team know. 

Can I use Trade Finance if I import from several countries rather than one supplier?

Yes, you can. Your facilities can support multiple supplier relationships and be used across multiple currencies. This is why Trade Finance is useful if you’re diversifying suppliers in response to freight disruption or rising freight costs. 

Is Trade Finance more expensive than a Bank Overdraft when freight costs are high?

Pricing will depend on facility size and risk profile rather than a flat comparison. Nevertheless, many importers find it more flexible than an overdraft facility because it’s tied directly to the transaction, and not a fixed credit limit.