Trade finance
Short-term funding secured against a specific transaction — the goods, the purchase order and the receivable — that pays your supplier now and is repaid when your customer pays you.
Trade finance funds a cycle rather than a business. The lender is backing one journey: money out to a supplier, goods in transit, goods delivered, money in from a customer. Once you see it that way the paperwork makes far more sense — and putting that pack together is something we do with you rather than leave to you.
The parameters
Where this product sits.
Ranges across the market, so you can sanity-check any quote — ours or anyone else’s — before you take it seriously.
- Cycle length
- 60–180 days
- From supplier payment to customer settlement. Longer cycles need a larger facility for the same annual volume.
- Funding level
- Up to 100%
- Of the supplier invoice on a confirmed order. Rarely 100% in practice on a first facility.
- Cost
- 0.5–2% per cycle
- Charged per transaction rather than annually. Four cycles a year at 1.5% is 6% of the funded value.
- Letter of credit
- 0.5–1.5%
- Issuance fee, plus confirmation costs where your supplier wants a UK or EU bank to stand behind it.
- Trading history
- 12–24 months
- With evidence of completed cycles. A first-time importer is a much harder case than the same business a year later.
These are indicative market ranges rather than a quotation — they are here so you can sanity-check any offer you are shown. Your own terms will be priced on the asset, the borrowing entity, your trading history and the exit, and we will put real figures in front of you on the first call.
Typical cases
What it is used for.
Importing stock
Overseas suppliers commonly want payment before shipping while your customers pay 30 to 60 days after delivery. That gap is the whole reason this product exists.
Confirmed purchase orders
A large order you cannot fund from working capital. The order itself, from a creditworthy customer, is much of what the lender is lending against.
Letters of credit
Where a supplier will not ship without a bank's undertaking to pay on presentation of the shipping documents. Standard in commodity and container trade.
Supply chain finance
Run by a large buyer, letting their suppliers draw early against approved invoices at the buyer's cost of funds. Excellent if your customer offers it.
In detail
How it works in practice.
What the lender is underwriting
Not you, primarily. They are underwriting the transaction: whether the supplier will actually ship, whether the goods are what the paperwork says, whether the end customer is good for the money, and whether the two ends of the cycle line up in time.
So expect the questions to be about the trade rather than your accounts. How long have you dealt with this supplier? What are the Incoterms? Who arranges and insures the shipping? What is the customer's payment history with you? Is there a confirmed order or an expectation?
A business with modest accounts and a five-year record of shipping the same goods from the same supplier to the same customer is a far better trade finance risk than a stronger business doing something for the first time. That is the opposite of how a term lender thinks.
How it fits with invoice finance
These two are halves of one cycle, and the strongest structure usually runs both. Trade finance pays the supplier and funds the goods up to the point they are delivered and invoiced. Invoice finance then advances against that invoice and repays the trade facility.
Where the same lender provides both, the handover is clean and priced as one arrangement. Where they are different lenders, the trade financier and the invoice financier need an agreement about who has what security and in what order, which is workable but takes time to document.
If you are importing and selling on credit terms and only have one of the two, you have funded half a cycle and will feel it every quarter.
Letters of credit, and why they slow things down
A letter of credit is a bank's promise to pay your supplier once they present documents that exactly match the terms. It gives an overseas supplier the comfort to ship to a buyer they do not know, and it is the backbone of container trade.
The word doing the work is exactly. Banks check documents against the credit's terms rather than against commercial intent, so a bill of lading naming the port slightly differently is a discrepancy, and payment waits until it is resolved or waived.
First presentations are frequently returned for exactly this reason, so it is worth drafting the documentary requirements carefully at the outset and using a freight forwarder with an experienced documentation team. Get that right and letters of credit run smoothly.
Before you sign
Four things worth checking.
Currency exposure
Buying in dollars and selling in sterling puts an unhedged FX position between your margin and the exchange rate. Price the hedge into the deal or agree forward cover at the outset.
Cycle overrun
Facilities are priced per cycle. A shipment delayed at port turns a 90-day cycle into 130 days and the extra cost lands on the same transaction's margin.
Concentration on one counterparty
If one supplier or one customer is most of your trade, the lender is really underwriting them. Their problems become your funding problems.
Goods that cannot be resold
Bespoke or perishable goods weaken the lender's fallback position considerably, and the terms will show it.
It is difficult. Most lenders want twelve to twenty-four months of trading and evidence of completed cycles, because the facility is underwritten on the transaction working and you have not yet shown that it does.
Where the end customer is very strong and the order is confirmed, some specialist funders will look at it. Expect a personal guarantee and a lower funding level on the first few cycles.
An overdraft is a general limit against the business. Trade finance is drawn against a specific transaction, with the goods and the receivable as security, and is repaid when that transaction completes.
That means it can be larger than an overdraft the same business would get, because the lender is looking at the trade rather than only the balance sheet.
No. Export finance funds the gap when you ship to an overseas customer on credit terms, and domestic supply chain and purchase order finance work on the same principle without a border involved.
The common factor is a defined trade cycle with an identifiable buyer and seller, not international shipping.
They define exactly where responsibility and risk pass from seller to buyer — who pays for shipping, who insures the goods, and at what point the goods become yours.
That determines when the lender's security actually attaches and who bears the loss if a container goes over the side. Getting them wrong can leave you paying for goods you do not yet own and cannot claim on.
Often, yes. Duty, VAT and freight can usually be included in the funded amount, which matters because they fall due at the border, well before your customer pays.
Say so at the outset. A facility sized on the supplier invoice alone leaves you finding the duty and import VAT from working capital.
Send the details
Tell us about the case.
If a call is easier, the number is at the foot of this page and we answer it. This form reaches the same people.
Related facilities
Merchant cash advance
An advance against future card takings, repaid as a share of them.
Invoice finance
Releasing cash tied up in unpaid sales invoices.