Trade Finance – Australia

2024 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

Podcast | Empowerment through trade: IFC and Ecobank on tackling the gender disparity in global trade This finding, from the IFC’s whitepaper “Banking on Women Who Trade Across Borders”, speaks to the gender disparity that still exists in the international trade space, particularly in emerging markets.
Ben Hillary Video Web Featured VIDEO | Riding the energy and commodities trading wave and what’s in stock for ETRM/CTRM in the next 5 years At Commodity Trading Week (CTW) in London, where the commodity community was gathered for two days, Deepesh Patel, Editorial Director, Trade Finance Global (TFG) spoke with Ben Hillary, Managing Director at Commodities People.
Factoring and supply chain finance in the shadow of the Areni-1 cave: EBRD's insights from Yerevan Factoring and supply chain finance in the shadow of the Areni-1 cave: EBRD’s insights from Yerevan The EBRD TFP conference gathered industry leaders to discuss evolution of factoring and supply chain finance in emerging markets.
Top corporates unsure of leading digital advisors Report: Top corporates unsure of leading digital advisors “None in particular” is the phrase most frequently heard from enterprises ranked in the top 100 for revenue across eight major global markets when asked which provider leads in digital… read more →
UK to join Indo-Pacific trading bloc UK to join Indo-Pacific trading bloc Business and Trade Secretary Kemi Badenoch officially signed the accession treaty to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in New Zealand, marking the beginning of the UK’s… read more →
UK Australia New Zealand flag UK trade deals with Australia and New Zealand take effect In an exciting development for UK businesses, the UK’s trade deals with Australia and New Zealand have officially come into force today, 31 May, marking the first negotiated trade agreements… read more →
Australia India Relations Australian and Indian Prime Ministers seek to expand regional ties Australian Prime Minister Anthony Albanese and Indian Prime Minister, Narendra Modi met in Sydney to discuss regional security and economic ties and signed a migration deal to boost Indian student… read more →
IFC provides $32.5m loan to Singapore’s Agrocorp to help improve food security in Bangladesh IFC provides $32.5m loan to Singapore’s Agrocorp to help improve food security in Bangladesh To improve food security in Bangladesh at a time of rising commodity prices amidst a global shortfall of staple crops, the International Finance Corporation (IFC) is providing a $32.5 million… read more →
Citi announces collaboration with Traydstream to streamline document services ​​Mercuria goes digital with CargoDocs electronic Bills of Lading (eBLs)​​ Mercuria, an integrated energy and commodity trading company, recently went live with CargoDocs electronic Bills of Lading (eBLs), having participated in its first ever paperless trade transaction for an iron… read more →

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

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Quick Links

Latest Australia feature from Trade Finance Talks

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Download our free trade finance guide



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About the Author

Patrick Tibke is the Assistant Editor & Copywriter at Trade Finance Global (TFG).

He has previously worked as a reporter and researcher at Nielsen, S&P Global, SportBusiness Group, Jakarta Globe, and more.

Patrick holds an MA in Journalism from the University of Sheffield, a BA in South East Asian Studies from SOAS at the University of London, and a Diploma in Journalism from the UK’s National Council for the Training of Journalists (NCTJ). He is an experienced reporter with a demonstrated history of working in the financial services industry. Skilled in journalism, social media, editing and publishing. Strong media and communications professional with an MA in Journalism from The University of Sheffield.

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