Trade Finance – United Arab Emirates

2021 Guide | Trade Finance Global

Trade Finance - United Arab Emirates

Welcome to the UAE Trade Finance and International Trade hub. Find out how our UAE-based team can help you access trade finance to increase your imports and exports, or find the latest research, information and insights on trade finance here.

What is trade finance?

Trade Finance is the financing of goods or services in a trade or transaction, from a supplier through to the end buyer. It accounts for 3% of global trade, worth some $3tn annually. ‘Trade Finance’ is an umbrella term, which includes a variety of financial instruments that can be used by an importer or exporter.

These include:

  • Purchase Order Finance
  • Stock Finance
  • Structured Commodity Finance
  • Invoice Finance (Discounting & Factoring)
  • Supply Chain Finance
  • Letters of Credit (LCs) and;
  • Bonds & Guarantees

The terms Import Finance and Export Finance are used interchangeably with Trade Finance.

In order to address some of the common issues and misunderstandings around Trade Finance, we have put together this short guide.

How can trade finance benefit my UAE-based business?

Trade finance facilitates the growth of a business by securing funds required to purchase goods and stock. Managing cash and working capital is critical to the success of any business. Trade finance is a tool which is used to unlock capital from a company’s existing stock or receivables or add further finance facilities based on a company’s trade cycles.

Why does this help? A trade finance facility may allow you to offer more competitive terms to both suppliers and customers, by reducing payment gaps in your trade cycle. It is beneficial for supply chain relationships and growth.

Other benefits of trade finance

  • Short to medium-term working capital, using the underlying products or services being imported/exported as security/collateral. It increases the revenue potential of a company, and earlier payments may allow for higher margins.
  • Trade finance allows companies to request higher volumes of stock or place larger orders with suppliers, leading to economies of scale and bulk discounts. 
  • Trade finance can also help strengthen the relationship between buyers and sellers, increasing profit margins. It allows a company to be more competitive.
  • Managing the supply chain is critical for any business. Trade and supply chain finance helps ease out cash constraints or liquidity gaps – for suppliers, customers, third parties, employees or providers. Earlier payments also mitigate risk for suppliers.

It is important to note that trade finance focuses more on the trade than the underlying borrower, i.e. it is not balance sheet led. Therefore, small businesses with weaker balance sheets can use trade finance to trade significantly larger volumes of goods or services and work with stronger end customers.

Due to the embedded risk mitigants that surround trade finance lending and instruments, it leads to the potential of a diversity of supplier base for trading companies. A more diverse supplier network increases competition and efficiency in markets and supply chains.

Companies can also mitigate business risks by using appropriate trade finance structures. Late payments from debtors, bad debts, excess stock and demanding creditors can have detrimental effects on a business. External financing or revolving credit facilities can ease this pressure by effectively financing trade flows.

 

Get started – talk to our UAE team



If you have a trade finance enquiry, please use the contact form below.

 

Finance Queries:

uae.team@tradefinanceglobal.com

trade.team@tradefinanceglobal.com

Partnership Queries:

introducers@tradefinanceglobal.com

Find out more about partnering with us here.

 

Want to learn more about Trade Finance?

Look no further. We’ve put together our feature UAE trade finance insights, research and articles, and you can catch the latest thought leadership from the TFG, listen to podcasts and digest the latest in international trade in the MENA region right here.

From the Editor – Trade Finance Insights

VIDEO: Philip Bowkley industry leader perspective: The future of global payments, cash and liquidity Philip Bowkley, co-chair of BAFT’s Global Payments Industry Council talks to TFG about the future of global payments, cash and liquidity
Why we need to stop talking about Bitcoin Elon Musk’s frenzied announcements around this one cryptocurrency detract from the wider-reaching benefits of DLT
Global experts have their say at the World Trade Symposium 2021 The Virtual World Trade Symposium 2021 got started today. Hosting a wide range of global experts, here are some of the top insights.
VIDEO: Standardisation 2.0 – ICC DSI’s 5 year plan – Fireplace chat with Oswald Kuyler Oswald Kuyler, Managing Director of ICC DSI talks to TFG about promoting digital trade, harmonisation and trade standards.
38 minutes – City Bank and ITFC record first-ever Shariah-based Blockchain Letter of Credit transaction City Bank has become the first Bangladeshi bank to execute a cross-border Letter of Credit (LC) transaction under a Shariah-based financing arrangement executed using blockchain technology.
ITFC: Safeguarding SME Resilience in the Face of a Global Pandemic Now is the time for trade finance institutions to take the lead in efforts to strengthen SME resilience and leave them in a position to be able to bounce back in the aftermath of the pandemic.
oil A ‘primal scream’ – oil reaches a historic low as it plunges into negative territory A toxic combination of macroeconomic dispute, a global pandemic which by now we are all too familiar with and dwindling storage capacity led to negative prices for crude oil for the first time in history, and the worst performance of West Texas Intermediate (WTI) on the New York Mercantile Exchange since its futures trading opening in 1983.
VIDEO: Anglo-Gulf Trade Bank – Pioneers in Digital Trade AGTB: New kid on the block. TFG heard from Daniel Gould, Deputy CEO of Anglo-Gulf Trade Bank, and its new digital offering for trade finance in the UAE and MENA region. Building a trade bank from scratch without relying on legacy technologies has enabled AGTB to reimagine trade finance, building a competitive product for the corporate banking space.
A Deep Dive into ADB’s Trade Finance Program In 2012, Asian Development Bank’s Trade Finance Program (TFP) commissioned a unique study, the first of its kind, to understand and quantify the unmet demand for trade finance, known as the global trade finance gap. Over the years, TFP has updated this study to quantify and inform policymakers and market participants about the main drivers for this persistent trade finance gap.

Videos – Trade Finance

Trade Finance Frequently Asked Questions

What types of Trade & Receivables Finance does TFG offer?

TFG assists companies to access trade and receivables finance through our relationships with 270+ banks, funds and alternative finance houses.

We assist specialist companies to scale their trade volumes, by matching them with appropriate financing structures – based on geographies, products, sector and trade cycles. Contact us to find out more.

Trade Finance & Stock Finance

  • Trade Finance (Purchase Order Finance)
  • Stock Finance
  • Pre Export Finance
  • Import & Export Finance
  • Structured Commodity Finance
  • Letters of Credit
  • Bonds & Guarantees

Receivables Finance & Invoice Finance

  • Receivables Purchase
  • Invoice Finance
  • Discounting
  • Factoring
  • Supply Chain Finance

Specialist Trade & Receivables Finance

  • Borrowing Base Facilities
  • Back-To-Back LC Lines
  • Long Dated Receivables – Media, Sport
  • Revolving Credit Facilities (RCF)
What is the process for applying for trade finance?

1. Application

The initial ‘credit’ application drives the process when applying for credit.

Lenders will often ask for information on current assets or collateral that the business owns, including debt and overdrafts, assets that the company or directors own (property, equipment, invoices).

2. Evaluating the Application

The evaluation process will normally involve some kind of credit scoring process, taking into account any vulnerabilities such as the market the business is entering, probability of default and even the integrity and quality of management.

3. Negotiation

Eligible SMEs applying for trade finance can negotiate terms with lenders. An SME’s aim with a lender is to secure finance on the most favourable terms and price. Some of the terms that can be negotiated can include fees and fixed charges, as well as interest rates.

4. The Approval Process and Documentation of a Loan

Typically, the account officer who initially deals with the applicant and collects all of the documentation will do an initial credit and risk analysis. This then goes to a specific committee or the next level of credit authority for approval. If the loan is agreed (on a preliminary basis) it goes to the legal team to ensure that collateral can be secured/ protected and to mitigate any risks in the case of default.

Read our full ‘trade finance application process’ here.

Strategic Partners:

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Quick Links

Latest UAE feature from Trade Finance Talks

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Latest UAE Trade News

18Feb

VIDEO: Standardisation 2.0 – ICC DSI’s 5 year plan – Fireplace chat with Oswald Kuyler

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Oswald Kuyler, Managing Director of ICC DSI talks to TFG about promoting digital trade, harmonisation and trade standards. … Read More →

15Feb

Building bridges and blockchains: A Roundup of GTR MENA 2021 Virtual

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All the insights from the first day of the biggest trade finance event in the MENA region. … Read More →

10Feb

TDB and Power Bank to collaborate in energy solutions

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The Eastern and Southern African Trade and Development Bank (TDB) and Power Bank (PB) have signed a cooperation agreement to… Read More →

29Jan

TFG partners with GTR for their MENA Virtual 2021

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London. 29th February 2021. TFG are delighted to announce their partnership with GTR MENA Virtual 2021. The virtual event will take… Read More →

28Jan

EBRD shareholders approve membership of United Arab Emirates

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The United Arab Emirates (UAE) has taken the first step towards becoming a member of the European Bank for Reconstruction… Read More →

20Jan

Etihad Credit Insurance and TDB cooperate to boost UAE and African trade

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The Eastern and Southern African Trade and Development Bank (TDB) and Etihad Credit Insurance (ECI), the UAE Federal export credit… Read More →

13Jan

WTO, OECD launch dataset on bilateral trade in services

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The WTO and the Organisation for Economic Co-operation and Development (OECD) on 13 January jointly launched a new dataset covering… Read More →

11Jan

38 minutes – City Bank and ITFC record first-ever Shariah-based Blockchain Letter of Credit transaction

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City Bank has become the first Bangladeshi bank to execute a cross-border Letter of Credit (LC) transaction under a Shariah-based… Read More →

25Nov

UKEF signs new export partnership with the UAE

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UK Export Finance has signed a cooperation agreement with its counterpart in the United Arab Emirates (UAE), Etihad Credit Insurance… Read More →

03Nov

BADEA and ITFC Intensify their Support to the African Countries to Fight COVID-19 Pandemic through the Arab Africa Trade Bridges (AATB) Program

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Jeddah- 02 November 2020 –The Arab Bank for Economic Development in Africa (BADEA) intensifies its partnership with the International Islamic Trade… Read More →

02Nov

Who’s Who? 7 initiatives in shipping, freight and supply chain using DLT & blockchain

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Freight forwarding, shipping and logistics are undergoing a digital makeover. Connecting the dots, enabling traceability and increasing transparency between parties… Read More →

08May

ITFC: Safeguarding SME Resilience in the Face of a Global Pandemic

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Now is the time for trade finance institutions to take the lead in efforts to strengthen SME resilience and leave… Read More →

28Apr

IsDB and ITFC Launch E-Learning Platform in African Countries as Crisis Response Action to Covid-19

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(Rabat, April 28, 2020): As part of the crisis response actions to strengthen the capacities of member countries to withstand the… Read More →

22Apr

A ‘primal scream’ – oil reaches a historic low as it plunges into negative territory

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A toxic combination of macroeconomic dispute, a global pandemic which by now we are all too familiar with and dwindling… Read More →

14Apr

Arab Africa Trade Bridges (AATB) Program Outlines Actions to Support Developing Countries Cope with the COVID-19 Crisis

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Initiatives focusing on pharmaceuticals and healthcare and other value-added sectors such as agriculture and textiles to take precedence  (Jeddah, KSA,… Read More →

06Oct

VIDEO: Anglo-Gulf Trade Bank – Pioneers in Digital Trade

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AGTB: New kid on the block. TFG heard from Daniel Gould, Deputy CEO of Anglo-Gulf Trade Bank, and its new… Read More →

17Sep

A Deep Dive into ADB’s Trade Finance Program

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In 2012, Asian Development Bank’s Trade Finance Program (TFP) commissioned a unique study, the first of its kind, to understand… Read More →

11Sep

Abu Dhabi Global Market awards CAT 1 Bank status to the Worlds’ first licensed Digital Trade Bank

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Regulated by the Financial Services Regulatory Authority of ADGM, Anglo-Gulf Trade Bank is poised to bring transformative, disruptive Banking-as-a-Service (BaaS)… Read More →

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