A form of pre-invoice finance, Trade Finance enables a business to order goods for onward sale (normally by way of Letter of Credit provided by the Trade Finance company) on the strength of confirmed orders from reputable clients for completed goods.
If your business does not have the financial track record to obtain credit from suppliers or the history to secure overdraft facilities, Trade Finance could be the answer.
This type of facility is often linked to a factoring facility and works as follows:-
Expect to pay between 2% and 4% of the supplier payment (plus any associated costs / import duty) for this type of facility. It is therefore usually only a viable option for transactions with a gross profit margin of 20% and more.
As this type of facility is considered to involve a higher risk to funnders than a traditional factoring faciliiy, most funders would place more emphasis on business owners when undertaking their due diligence. In most cases funders will only commit if director/shareholders are houseowners.