BUSINESS FINANCE / TRADE FINANCE
Boost your purchasing power.
What is Trade Finance?
Trade finance allows your business to conduct international transactions seamlessly and effectively. With the right trade finance products from the right financial provider, you can mitigate the risks and uncertainties inherent in international trade.
1. Access the Funding you need
Trade finance can help you access the necessary funding required to support your trade activities. From letters of credit to bank guarantees, internationally trading businesses can better secure working capital, manage cash flow and fulfill their trade-related financial obligations when they have a financial facility that works for them.
2. Mitigate the Risks of trade
International trade is not without its risks. Whether you’re interested in mitigating the political, economic, transport or trade risks associated with your transaction, trade finance facilities can help you in a variety of ways to insure your investment, protect your business, and insulate yourself from financial exposure.
3. Facilitate more Trade
For your business to grow and succeed, you need financial facilities to ensure a smooth execution of trade transactions. Financial institutions, such as ScotPac, can play an integral role in providing verified trade documents, ensuring compliance with trade regulations, and acting as an essential middle-man between two different trading organisations.
What are our customers saying about us?
For us, the real advantage of invoice finance is that we can offer longer payment terms to customers thanks to ScotPac.
ScotPac make the effort to understand us and really partner with us. Its a lot more flexible than dealing with banks.
ScotPac have assisted a number of our clients in time critical situations and are highly experienced cash flow lenders.
We think of ScotPac more than just a Financial Services provider, they care enough to know our business and as such we are more like partners
It’s growth funding that gets us the best from our working capital, which covers materials, wages and other costs while we wait to be paid for our goods.
Ready to pay, at home or away
- A REVOLVING LINE OF CREDIT WITH NO LOCK-IN CONTRACT
- NO REAL ESTATE SECURITY REQUIRED
- TAKE ADVANTAGE OF BULK DISCOUNTS OR SUPPLIER SPECIAL OFFERS
Fast, flexible and personalised Home Loans and Business Loans for Business Owners
- FAST SET UP – CONDITIONAL APPROVAL IN AS LITTLE AS 48 HOURS
- FLEXIBILITY ON DOCUMENTATION REQUIREMENTS
- USE YOUR RESIDENTIAL SECURITY FOR FUTURE BUSINESS BORROWING
Our Invoice Finance solution allows you to access the cash in your unpaid invoices
- LINE OF CREDIT WITH NO NEED FOR PROPERTY SECURITY
- UNLOCK THE VALUE IN YOUR INVOICES
- FACILITIES FROM $10K TO $150M
Asset Finance helps by financing new and pre-owned equipment.
- FUNDING AVAILABLE IN AS LITTLE AS 24 HOURS
- FUND NEW AND PRE-OWNED ASSETS
- FUNDING FOR IMPORTED EQUIPMENT
If you're ready to grow, we're ready for you!
ScotPac Trade Finance allows you to close the working capital gap between sales and raw material or inventory procurement. Growing your business can be impossible without being able to meet short payment terms or even completely upfront payments.
Our local office in Guangzhou, China, can work with you to negotiate favourable terms and ensure quality goods from your overseas supplier. As an industry-leading expert in trade and related trade finance, our specialists have the know-how to help you find a facility that will help your business grow.
For more information about how we can help your business, fill out an enquiry form or call us directly.
We work hard to find a way to say “yes.” With flexible and tailored solutions, we’ve helped businesses secure trade finance Australia-wide!
Frequently Asked Questions
HOW DOES TRADE FINANCE WORK?
Trade finance is a form of working capital and usually refers to financing facilities to ensure cross-border transactions, such as imports and exports.
For an importer, it can mean receiving funding to pay an overseas supplier. This accounts for the gap between the time the goods are paid for and the time they are received, sold and transformed into capital. For an exporter, it can mean receiving payment for goods or services that have been provided but yet to be delivered.
Exporters are usually also interested in export factoring or bill facilities as the main means of financing overseas credit. This can be supported by a provided letter of credit to secure the transaction and reassure both parties.
HOW CAN TRADE FINANCE HELP IMPORTERS AND EXPORTERS?
For importers, purchasing goods or services from a supplier with no payment terms or a short term can create a working capital or cash flow gap. Trade finance fills in this gap so that the company is not out of pocket or unable to access required cash.
- Trade finance is more flexible than business loans or overdraft facilities.
- It allows businesses to retain access to capital while their goods or raw materials are being shipped from overseas.
- It allows trading partners to negotiate bulk buying or early payment discounts from their suppliers.
- It ensures the smooth running of an international transaction, especially with support from overseas trade advisors such as the ScotPac team in Guangzhou, China.
- Ensures fast access to reliable funding. This allows a business to fill large orders, access bulk discounts, take advantage of seasonal cycles and ensure stock levels are adequate.
For exporters, a trade finance facility can help to smooth over the gap between the manufacturing and supplying of goods and the time at which payment is received.
- More capital can be freed up during manufacturing.
- Suppliers are paid quicker and more reliably.
- Upfront payments can secure a discount.
- Faster application processes without the strict red tape of traditional loans ensure a smoother, faster process.
- Flexible lines of credit can grow in sync with your business.
In short, trade finance helps businesses on both ends of the transaction to build trustworthy relationships for international trade. Exporters and importers can enjoy healthy cash flow, working capital access and the support they need to accelerate growth and ensure success.
WHAT ARE THE TYPES OF INTERNATIONAL TRADE FINANCE?
There are generally four ways to finance a global trade transaction between a buyer and supplier.
Letters of Credit
A letter of credit helps to reduce the risk for both the supplier and the buyer by guaranteeing payment. There may be certain conditions to be met, such as when goods are shipped, or the buyer receives the goods, but the letter reassures both parties that the payment will be provided. For the buyer, it provides reassurance that the goods paid for will be manufactured and shipped on time before payment is released to the supplier.
Documents Against Payments
Documents against payments is a trade finance mechanism where the supplier receives payment in exchange for providing the shipping documents. This facility protects the supplier by ensuring that funds are available to pay for the ordered goods. It furthermore protects the buyer by ensuring the supplier has ensured shipment of the goods before receiving payment.
A telegraphic transfer – or TT – is one of the most widely-used payment methods when it comes to trade finance. In short, it is a form of electronic transfer of funds to the recipient’s bank account. Due to the fact that many suppliers will require an advance payment before they manufacture goods, the TT can be used to ensure funds are provided quickly and on time.
Invoice finance allows businesses to use their accounts receivable, or outstanding invoices due to them, as collateral to boost cash flow. With up to 95% of the value of outstanding invoices available upfront and fast, it can be a simple way for businesses to improve short term access to working capital. The remaining balance is often released once customers pay the invoice. Combined with other forms of trade finance, invoice finance can allow businesses to access otherwise tied up capital due to the delays in shipments and manufacturing processes.
HOW DOES TRADE FINANCE WORK?
There are four main parts of trade finance that work together to support international and domestic trade transactions.
Trade Finance products facilitate payments internationally. The fast transfer of funds can help to ease cash flow gaps and protect both the buyer and supplier from non-performance risks.
The conditions of payment in a Trade Finance transaction can help to mitigate the risk involved in international trade for both the buyer and supplier.
Funding can be used to support every stage of the transaction. Suppliers can receive payment faster, buyers can avoid cash flow gaps, and more trust can be built in the relationship.
Miscommunication is often one of the main causes of disputes between buyers and suppliers. Trade Finance ensures miscommunication is minimised by providing accurate and timely information that both parties can rely on with confidence.
CAN TRADE FINANCE REDUCE RISK?
Yes. International and domestic trade involves a level of inherent risk for both the supplier and the buyer. The supplier needs to know that the potential buyer can pay for the goods, and the buyer needs to know that the goods will be manufactured and delivered on time and to specification.
Trade financing helps to mitigate this risk for both sides of the transaction, importers and exporters. For example, a letter of credit ensures that the supplier knows they will be paid for the goods produced, and the buyer will only pay for the goods when the certain conditions are met. Once this all occurs, payment is issued to the supplier.
WHAT’S THE DIFFERENCE BETWEEN SUPPLY CHAIN FINANCE AND TRADE FINANCE?
Trade finance and supply chain finance are both financial solutions that facilitate trade and help buyers and suppliers. They both allow businesses to manage access to working capital and to mitigate risk. But there are some differences that make each solution more or less suitable for different businesses, depending on the circumstances.
Supply chain finance is typically utilised when the buyer and supplier have a prior history of trading. In this case, the buyer usually has a stronger credit rating than the supplier and then agrees to approve the financing of their supplier’s invoices to increase liquidity for both businesses.
Trade finance covers a broader range of trade finance products and offers more risk mitigation for suppliers and buyers. This is especially necessary in instances where there is no prior history of business. For example, letters of credit and documents against payments are two tried and tested ways trade finance can mitigate risk and increase the level of confidence for both parties.
WHAT ARE THE RISKS OF TRADE FINANCING?
Third-party finance companies providing funding can significantly lower the risk of trade financing. But even with Trade Finance, there is still a degree of risk inherent in international trade.
The buyer’s primary risk is that the supplier will not deliver the purchased goods on time or to specification under the terms of the contract, especially once payment has been received.
To reduce this risk, the finance company will analyse the supplier’s track record and may require Documents Against Payments before transferring funds or providing payment.
For the supplier, the degree of risk is based on whether the buyer is able to provide payment for the goods ordered. A strong credit rating and financial track record can be important in such instances. The finance facility providing company will usually issue a Letter of Credit to help mitigate the risk of non-payment from the buyer.
Alongside the primary risks involved, external factors like foreign exchange risk, geopolitics, and international sanctions can also affect international trade.
If you’d like to find out how to mitigate the risks of international trade and ensure smooth transactions, make sure to speak to our experienced Trade Finance specialists at ScotPac today.
IS TRADE FINANCE CONSIDERED A LOAN?
No, it is not a loan. Trade finance in Australia is an arrangement with a third party to produce a short or mid-term funding solution to allow a transaction to take place without either business suffering from cash flow gaps or shortages.
Suppliers can use the unpaid invoices to access funding while buyers can access credit to cover the upfront cost of purchased goods.
HOW FAST CAN TRADE FINANCE PROVIDE FUNDING
ScotPac knows just how important being agile, flexible and quick is to capitalise on trade opportunities. With funding facilities requiring as little as 24 hours for approval, we can ensure that you’re able to access funds as quickly as possible, pending the terms of your credit arrangement.
HOW MUCH DOES TRADE FINANCE COST?
Trade finance products will incur costs depending on the type and duration of the term of the facility. ScotPac’s market-leading affordable rates will ensure you get best value for money. Speak to our specialists today for more tailored fee information for you.
HOW DO I APPLY?
There are two ways in which you can set up a trade finance facility with ScotPac. Either fill out our quick enquiry form, or call us today.
We’ll work with you to find the right solution for your business. If you need help negotiating with international companies, suppliers and manufacturers, we even have expert trade advisors in both Australia and China who would be more than happy to assist you.