Trade Finance – Australia

2023 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

Foreword – Sailing into 2023: Navigating the new year ‘Permacrisis’ was crowned word of the year by the editors of the Collins English Dictionary at the end of 2022, defined as “an extended period of instability and insecurity”. It seems an appropriate term to describe the state of global trade, finance, and supply chains as we enter 2023.
To agriculture and beyond: a look at how IoT technology is transcending industry silos 2022 was a year filled with ups and downs for trade technology companies, but there are many bright spots for 2023.
Think data, not documents advancing MLETR in 2023 VIDEO | Think data, not documents: advancing MLETR in 2023 To learn more about UNCITRAL and the efforts to support the regulatory environment around digital trade, Trade Finance Global (TFG) spoke with Luca Castellani.
Blockchain ESG and data standards driving changes in the trade finance banking sector Blockchain, ESG, and data standards driving changes in the trade finance banking sector Trade Finance Global spoke with Hari Janakiraman head of industry and innovation, transaction banking, from Australia and New Zealand Banking Group (ANZ) about the changing market conditions throughout the Asia-Pacific market and the advancements of digital technology in trade.
2-6 Data Standards - Pradeep Nair - Standard Chartered Data standards: a key to a truly sustainable trade For sustainable trade finance to scale, the industry needs a uniform model for ESG data that can be used by everybody, says Pradeep Nair, Global Head of Structured Solutions and Development of Standard Chartered Bank
TFG Weekly Trade Briefing TFG Weekly Trade Briefing, 27th June 2022 Your Monday morning coffee briefing from TFG: China trade sector poised for decline, UK appoints new trade commissioner to Africa…
Why the Queen’s speech is about to accelerate the acceptance of digital trade documents into English law Why the Queen’s speech is about to accelerate the acceptance of digital trade documents into English law If a new trade bill is passed during the current UK parliamentary term, digital paperwork could be legalised under English Law, which could be a landmark moment for the trade and export industry. 
Black diamond rises Demand for coal heading to new all-time high despite net zero targets Lewis Evans Trade Finance Global Black diamond rises: Demand for coal heading to new all-time high despite net zero targets Despite net zero targets agreed to at COP26, global demand for coal is hotter than ever. TFG’s Lewis Evans investigates why…
2021 Year in Review 2021 – A Year in Review with Trade Finance Global As the clocks struck midnight, we looked back at over 700 articles, handpicking our favourite stories that made the headlines in 2021

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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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.

He 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).

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