Trade Finance – Germany

2022 Guide | Trade Finance Global

Trade Finance - Germany

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



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

 

Finance Queries:

de.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 Germany 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

Visa Highs & Lows VIDEO | Visa: the highs and lows of B2B payments To learn more about the cross-border B2B payments landscape, Trade Finance Global (TFG) interviewed Ben Ellis, global head of Visa B2B Connect.
Autumn statement- what’s in store for the UK economy and what could this mean for trade? Autumn statement: what’s in store for the UK economy and what could this mean for trade? November 17, 2022 saw the unveiling of the UK’s Autumn Statement. The plan hopes to create a more stable UK economy in light of the current global financial uncertainty.
Float or sink- BIMCO discusses eBL adoption, standards, interoperability PODCAST | Float or sink: BIMCO discusses eBL adoption, standards, interoperability Given the complexity of maritime transport, Annie Kovacevic sat down with Grant Hunter, director of standards, innovation, and research at BIMCO, to learn more about hot topics in the industry.
TFG Weekly Trade Briefing TFG Weekly Trade Briefing, 21st November 2022 Your Monday coffee briefing from TFG – PODCAST | Float or sink: BIMCO discusses eBL adoption, standards, interoperability
Auf wiedersehen fossil fuels- Germany’s route towards LNG adoption Auf wiedersehen fossil fuels: Germany’s route towards LNG adoption In a bid to diversify energy sources and become more eco-friendly, Germany has enacted a grand push toward natural gas. 
Commerzbank on Standardisation- the key to sustainable trade finance Commerzbank on standardisation: the key to sustainable trade finance The world of trade is changing. Increasingly, the topic of environmental responsibility is taking centre stage, with discourse specifically circling around how the finance industry can implement sustainability measures more effectively. 
Debt utilisation in European SMEs Debt utilisation in European SMEs Trade Finance Global (TFG) surveyed firms throughout Europe to gain an understanding of SMEs’ trade finance usage norms and their propensity to pay for new or additional trade finance products and services.
Press release SME TF research 2022 Is SME trade finance viable? A European outlook Despite high inflation, record energy prices, and geopolitical uncertainty, demand for trade finance SMEs is on the rise.
Safe keeping: The promise of government-controlled European strategic gas reserves Safe keeping: The promise of government-controlled European strategic gas reserves After record-high gas prices and extreme price volatility in Q4 2021, European policymakers are now warming to the idea of a procurement rethink

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 Germany trade team

Speak to our trade finance team

Quick Links

Latest Germany feature from Trade Finance Talks

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About the Author

Sheena Magdaraog is responsible for the TFG Weekly Trade Briefings and content at Trade Finance Global.

With an extensive background in WordPress CMS and Digital Marketing, she loves the digitalization of trade and is fascinated about its impact on day to day transactions.

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