Trade Finance – Australia

2021 Guide | Trade Finance Global

Trade Finance - Australia

Welcome to the Australia Trade Finance and International Trade hub. Find out how our Australia-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 Australia-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 Australia team



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

 

Finance Queries:

au.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 Australia 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 region right here.

From the Editor – Trade Finance Insights

ITFA and Sullivan & Worcester issue joint guidance on the use of Risk-Free Reference Term Rates in Trade and Export Finance The guidance note looks at Term SOFR (SOFR is the Secured Overnight Financing Rate), the ARRC recommended RFR term rate
Open Banking: Forget about cloud and APIs – it’s all about value generation The trade finance space has seen a huge influx of capital in the development of fintech solutions to address some of today’s most pressing trade challenges.
Fireside chat: Contour, on platforms, competition and the misconceptions of interoperability The need for trade digitization has never been more prevalent than it is today, especially with pandemic-induced restrictions emphasizing the inefficiency of paper-based trade. Our Editor, Deepesh Patel sat down with Contour’s CEO and Chief Product Officer, as well as TradeLens’ Head of Strategy and Operations, to discuss how fintech can come together to partner to solve these problems.
Podcast: Chief Economist insights: are iron ore prices propping up global trade? World trade of goods has declined some 12% in the last year, representing a loss of $22 trillion USD of trade. Is it all doom and gloom for trade, or will we see a resurgence?
UK food exports to be boosted by new mentor scheme Department for International Trade (DIT) launches new mentorship programme to help UK farmers and food producers boost their exports.
TFG Weekly Trade Briefing, 24th May 2021 Your morning coffee briefing from TFG. World trade’s recovery from the COVID-19 crisis hit a record high in the first quarter of 2021, increasing by 10% year-over-year and 4% quarter-over-quarter. WTO Director General calls for action on trade finance in low to middle-income countries.
Post-covid Asia will grow strongly in 2021 but structural problems to pile up 2020 was a terrible year for Asia but for some less than for others. Alicia Herrero Garcia outlines what’s in stock for markets in Asia in 2021
The Regional Comprehensive Economic Partnership (R.C.E.P): A return to multilateralism On the 15th November, 2020 several Heads of State/ Government of the Member states of the Association of Southeast Asian Nations (ASEAN) and other nations met virtually to witness the signing of The Regional Comprehensive Economic Partnership (RCEP) agreement – solidifying over 8 years of negotiations and challenges.
How to Prevent Double Invoice Fraud EIPP in combination with blockchain can help banks avoid duplicate Invoice Financing and perform dedupe effectively.

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:

Get in touch with our Australia trade team

Speak to our trade finance team

Quick Links

Latest Australia feature from Trade Finance Talks

Our Australia trade knowledge partner

Download our free trade finance guide



Latest Australia Trade News

24Aug

Podcast: Chief Economist insights: are iron ore prices propping up global trade?

0 Comments

World trade of goods has declined some 12% in the last year, representing a loss of $22 trillion USD of… Read More →

21Jun

TFG Weekly Trade Briefing, 21st June 2021

0 Comments

International Chamber of Commerce (ICC) warns G7 leaders they risk imposing major costs to the global economy… Read More →

15Jun

UK and Australia form first post-Brexit trade deal

0 Comments

The UK and Australia have entered into a momentous trade agreement, the first on the road to the post-Brexit economy…. Read More →

09Jun

UK food exports to be boosted by new mentor scheme

0 Comments

Department for International Trade (DIT) launches new mentorship programme to help UK farmers and food producers boost their exports…. Read More →

26May

WTO Appellate Body no longer functioning – come join the (interim) party?

0 Comments

With the WTO Appellate Body no longer functioning, will the interim appeal arrangements established by the EU, Australia, Canada and… Read More →

24May

TFG Weekly Trade Briefing, 24th May 2021

0 Comments

Your morning coffee briefing from TFG. World trade’s recovery from the COVID-19 crisis hit a record high in the first… Read More →

09Apr

Singapore is the first country to ratify RCEP trade deal

0 Comments

Singapore has ratified the Regional Comprehensive Economic Partnership (RCEP) trade agreement, with plans to implement the accord on the 1st… Read More →

27Mar

Looking for Love Outside the EU: UK Trade in a Post-Brexit World

0 Comments

The trade consequences of Brexit already include a dramatic shrinking of commerce with the EU, an expansion of trade with… Read More →

04Mar

Post-covid Asia will grow strongly in 2021 but structural problems to pile up

0 Comments

2020 was a terrible year for Asia but for some less than for others. Alicia Herrero Garcia outlines what’s in… Read More →

10Dec

Launched: ICC SME Climate Hub – Action tools for small and medium-sized businesses

0 Comments

The SME Climate Hub has joined forces with Oxford University to provide small and medium-sized enterprises (SMEs) with tools and… Read More →

25Nov

The Regional Comprehensive Economic Partnership (R.C.E.P): A return to multilateralism

0 Comments

On the 15th November, 2020 several Heads of State/ Government of the Member states of the Association of Southeast Asian… Read More →

02Nov

12 companies tackling trade document digitization head on

0 Comments

The age old problem of document digitization in trade has probably been around since goods were traded using stone tablets… Read More →

10Sep

UK takes major step towards membership of Trans-Pacific free trade area

0 Comments

The UK has today taken a major step in the process of joining CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific… Read More →

07Sep

Government announces new Board of Trade

0 Comments

The Department for International Trade has announced its new advisers to the Board of Trade, comprising of senior figures from business,… Read More →

28Jul

What’s next for the pound? – Quarterly Currency Forecast

0 Comments

Smart Currency Business have collated predictions from major banks and highlighted key factors which may influence the pound, euro and… Read More →

10Jul

UK inward investment projects increase in 2019

0 Comments

Figures from the Department for International Trade published today (10 July), show the UK attracted 1,852 new inward investment projects… Read More →

10Jul

How to Prevent Double Invoice Fraud

0 Comments

EIPP in combination with blockchain can help banks avoid duplicate Invoice Financing and perform dedupe effectively…. Read More →

02Jul

PODCAST: ‘China Plus One’ Strategy – Best of Both Worlds? (S1 E45)

0 Comments

TFG heard from Dr. Deborah Elms, CEO, Asian Trade Centre on the impact of COVID19 for businesses in Asia Pacific… Read More →

Back to Top