BUSINESS FINANCE / TRADE FINANCE
Boost your purchasing power.
What is Trade Finance?
Improve your purchasing power today
ScotPac Trade Finance provides you with fast funding for stock, inventory and raw materials, so you don’t have to turn away new orders. Use a revolving line of credit to pay your overseas or local suppliers, when you need it, in almost any currency. We can facilitate transactions using TT (telegraphic transfer), Letters of Credit or Documents Against Payment.
Or fund finished goods in conjunction with an Invoice Finance facility for an end-to-end funding solution and cover cash flow gaps for up to 150 days.
We can tailor a flexible finance package to give you more purchasing power on simple or complex trade requirements, both domestic and international.
What our customers are saying
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.
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
ScotPac have assisted a number of our clients in time critical situations and are highly experienced cash flow lenders.
ScotPac make the effort to understand us and really partner with us. Its a lot more flexible than dealing with banks.
For us, the real advantage of invoice finance is that we can offer longer payment terms to customers thanks to ScotPac.
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
Trade finance provides a cash flow injection to help manage the import or export of goods
- PAY OVERSEAS AND DOMESTIC SUPPLIERS
- INCREASE STOCK LEVELS AND EXTEND PAYMENT TERMS
- SELL TO OVERSEAS CUSTOMERS
Who does this suit?
ScotPac Trade Finance closes your working capital gap between sales and procuring inventory or raw material, fast. Don’t let short payment terms or full upfront payments stop you from growing your business and taking on new opportunities.
Our office in Guangzhou, China, works with you to negotiate favourable terms and ensure quality goods from your supplier base.
As industry-leading trade experts, we have the know-how to make simple or complex deals work for you.
We find a way to say “yes”. We’re nimble and inventive with our funding solutions by unlocking the hidden value in your assets.
Frequently Asked Questions
HOW DOES TRADE FINANCE WORK?
Trade Finance is a form of working capital; the term commonly refers to the financing of cross-border, import/export transactions.
For an importer, it means receiving funding in order to pay a supplier and allow time for the goods to be received, sold and turned into cash.
For an exporter, it provides working capital until the overseas customer pays for the goods or services that have been delivered.
Exporters typically utilise export factoring or bill facilities as the primary means of financing overseas trading, which may be supported by a letter of credit to secure the transaction
HOW CAN TRADE FINANCE HELP IMPORTERS AND EXPORTERS?
For importers that purchase goods from a supplier with short or no payment terms, Trade Finance will close the cash flow gap, so you aren’t out of pocket.
- More flexible than a traditional business loan or overdraft.
- Maintain working capital rather than having funds tied up while goods and materials are produced and shipped.
- Negotiate bulk buying/early payment discounts with your suppliers.
- Make use of our overseas trade advisors in Guangzhou, China to help ensure the import process runs smoothly from start to finish.
- Fast access to funding. You can buy more stock to fulfil large orders, access supplier discounts or take advantage of seasonal buying and selling cycles.
For export businesses, a trade finance facility can bridge the gap between manufacturing goods and waiting to receive payment from customers.
- Free up capital tied up in the manufacturing process.
- Get paid faster and only repay when your customer pays for the goods.
- Offer upfront payments to secure a discount in exchange for paying supplier’s invoices faster.
- Fast application process without the strict lending criteria associated with a traditional business loan.
- Flexible line of credit that grows with your business.
Trade finance solutions help exporters to build relationships with domestic and international customers. Exporters can maintain a healthy cash flow and speed up sales cycles to accelerate growth.
WHAT ARE THE METHODS OF FUNDING INTERNATIONAL TRADE?
There are generally four ways to finance a global trade transaction between a buyer and supplier.
Letters of Credit
A letter of credit reduces the risk for both the supplier and the buyer. It guarantees payment to the supplier if certain conditions are met, such as when goods are shipped, or the buyer receives the goods. For the buyer, it ensures that the goods will be manufactured and shipped on time before payment is released.
Documents Against Payments
Documents against payments is a trade finance mechanism where the supplier receives payment in exchange for the shipping documents. It protects the supplier by ensuring that funds are available to pay for the ordered goods and protects the buyer by ensuring the supplier proceeds with the shipment of goods before receiving payment.
A telegraphic transfer is one of the most widely used trade finance payment methods. It’s an electronic transfer of funds to the recipient’s bank account. Many suppliers will require advance payment before the manufacturing of goods, and a telegraphic transfer can be used to transfer funds quickly.
Invoice finance allows importers and exporters that raise invoices to use their accounts receivables as collateral to boost cash flow. You can receive up to 95% of the value of your outstanding invoices upfront. The remaining balance is released when your customer pays the invoice. This form of trade finance can be combined with other solutions to release capital tied up in shipments and the manufacturing process.
WHAT ARE THE MAIN ASPECTS OF TRADE FINANCE?
There are four main aspects of Trade Finance used to support international and domestic trade transactions.
Trade Finance products facilitate payments around the world. Funding ensures the fast transfer of funds while helping to ease cash flow gaps and protect the buyer and supplier from non-performance risks.
The conditions of payment in a Trade Finance transaction help to mitigate the risk involved for both the buyer and supplier.
Funding can be used to support every stage of the transaction. The supplier can get paid faster, while the buyer can avoid cash flow gaps while waiting for goods to arrive.
Miscommunication is one of the main reasons for disputes between buyers and suppliers. Trade Finance helps to avoid miscommunication by ensuring accurate and timely information so that both parties can conclude a transaction with confidence.
HOW DOES TRADE FINANCE HELP TO REDUCE RISK?
International and domestic trade involves risk for both the supplier and the buyer. The supplier needs to ensure that a potential buyer can pay for the goods, and the buyer needs to ensure that the goods will be manufactured and delivered on time.
Trade financing helps to mitigate the risk for both parties, helping 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 certain conditions are met, such as the submittal of a bill of lading. Once the terms of the agreement are met, 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 to manage working capital and mitigate risk. But some differences make each solution more suitable for specific circumstances.
Supply chain finance is typically used when the buyer and supplier have a history of trading. The buyer usually has a stronger credit rating than the supplier and agrees to approve the financing of their supplier’s invoices to increase liquidity for both parties.
Trade finance covers a broader range of solutions and offers more risk mitigation for suppliers and buyers that have never done business together before. Letters of credit and documents against payments are two well-established ways trade finance can mitigate risk.
WHAT ARE THE RISKS OF TRADE FINANCING?
The level of risk involved in a trade transaction is lowered when a third-party finance company provides funding. But even with Trade Finance, the supplier and buyer still encounter a degree of risk.
The buyer’s primary risk is that supplier will not deliver the purchased goods under the terms of the contract once the finance company has funded the transaction. To mitigate this risk, the finance company will analyse the supplier’s track record and may require Documents Against Payments before transferring funds.
For the supplier, the degree of risk is based on the buyer’s ability to provide payment upon delivery of goods. A strong credit rating and track record can be important when dealing with a new customer. The finance 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 sanctions may need to be considered. Our experienced Trade Finance specialists at ScotPac can help you mitigate these risks and ensure a smooth transaction.
IS TRADE FINANCE CONSIDERED A LOAN?
Trade Finance is not a loan. A typical Trade Finance arrangement is a short to mid-term funding solution that allows both the buyer and supplier to conclude a transaction without suffering cash flow shortages.
The supplier can use the unpaid invoice to access funding while the buyer can access credit to cover the costs of purchased goods.
HOW QUICKLY CAN I RECEIVE FUNDING?
We understand it’s vital to move fast to capitalise on opportunities. The terms of your credit arrangement will determine how long it takes to release funds. We’ll work with you to put a funding facility in place in as little as 24 hours of approval.
HOW MUCH DOES TRADE FINANCE COST?
The cost of trade finance depends on the type and duration of the facility and the services you require. We offer some of the most affordable rates on the market.
WHAT DO I NEED TO APPLY?
Fill out a quick enquiry form or call us today to determine the right solution for your business. If you need help negotiating with international companies and manufacturers, our expert trade advisors in New Zealand and China are happy to help.