Trade Finance
Trade, or export finance covers a range of solutions to help mitigate financial risks such as default or delayed payment.
Manufacturers who import their raw materials also face their own challenges: with overseas suppliers wanting to be paid for their materials before shipping them, the need arises for finance to fill the gap between importing the raw materials and the point at which the finished product is sold. That’s where export finance comes in.
The term covers a wide range of tools. They are all used by banks to manage the capital required to allow international trade to take place as easily and securely as possible.
See also:
Letters of credit have traditionally been the most used trade finance tool, but now a large amount of global trade is conducted on an open account basis. Open account transactions are a kind of ‘buy now, pay later’ approach, involving regular payments for a continuing flow of goods rather than paying per transaction.
For more information, visit UK Export Finance (the UK’s export credit agency) and The Department for Business and Trade.
