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

CEPA or CPTPP? An Overview of UK-Japan Trade Today’s podcast focuses on the Free Trade Agreement, FTA with Japan, more specifically referred to as the Comprehensive Economic Partnership Agreement, Or CEPA. The UK and Japan are major investors in each other’s economies, ranking fifth and sixth respectively for inward foreign direct investment.
Report: Brexit could cost UK exporters £25bn as full Covid recovery pushed back to 2023 The UK’s exporters could face a Brexit bill worth as much as £25bn in lost revenues in 2021, according to a new report by Euler Hermes.
The way to Digital Silk Road: China focus How is China using technology to build the technical and financial infrastructure for the ambitious BRI? Eugenio Reggianini reports on the BSN and DCEP
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.
PODCAST: ‘China Plus One’ Strategy – Best of Both Worlds? (S1 E45) TFG heard from Dr. Deborah Elms, CEO, Asian Trade Centre on the impact of COVID19 for businesses in Asia Pacific and how governments and policymakers can accelerate the economic recovery.
WHITEPAPER: Asia’s digital trade landscape heading into a new decade As the APAC region solidifies its global trade leadership, banks gain an opportunity to serve new finance needs as long as they make needed technology and process changes.
PODCAST: APAC Trade and Supply Chain Finance Market Commentary (S1 E38) TFG heard from Finastra and Cognizant discussing trade and supply chain trends in Asia for 2020. Accounting for half of global GDP, what are the biggest challenges that lie ahead?
Tapping into Emerging Australasian Trade Finance Trends East and Partner’s Martin Smith and Simon Klein discusses emerging Australasian trade finance trends and approaches to capitalize on them. Voice of the Customer Analytics In the face of global… 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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