Trade Finance – Germany

2024Guide | 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

Trade transactions: Remove the paper – keep the process The Middle East has recently thrived by capitalising on digital advancements across various sectors.
icc austria saibo jin web featured VIDEO | The Year of Dragon and the year of the guarantee: How ICC Austria’s Trade Finance Week helps perfect the SPC’s guarantee rules Hear from Jin Saibo, Attorney at Law, Beijing Jincheng Tongda & Neal Law Firm about the evolving landscape of trade finance, China’s integration of international standards and the country’s innovative transition towards digital negotiable instruments.
Kai Fehr Web Featured VIDEO | Unlocking global prosperity whilst running the ‘hamster wheel’ for trade finance Deepesh Patel spoke with Kai Fehr, Global Head of Trade and Working Capital at Standard Chartered Bank at FCI’s 56th Annual Meeting in Seoul.
Out of scope: How ESG will shake up global trade Out of scope: How ESG will shake up global trade Alex Gray, Director of Trade and Transaction Banking at the London Institute of Banking & Finance, outlines why the drive for net zero will change trade patterns, why technology could make those changes unpredictable, and how trade professionals can prepare.
germany German industrial production falls in June German industrial production declined more sharply than anticipated in June, data released on Monday revealed, highlighting the difficulties encountered by manufacturing amidst a downturn in Europe’s largest economy. Production decreased… read more →
TradeTech and deep tier financing Tradetech and deep tier financing: How emerging technology can help supply chains meet ESG standards Alex Gray, head of trade finance at The London Institute of Banking & Finance, explains why the staff at trade banks will have an important role to play in gathering and utilising ESG data from supply chains 
office building cbi featured Q&A | CBI’s Liliana Fratini Passi on innovation in the banking sector In light of the current landscape, Trade Finance Global (TFG) were delighted to have the opportunity to speak with Liliana Fratini Passi, Managing Director, CBI, about how innovating and collaborating may be the way forward. 
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. 
sustainable green finance 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. 

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

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Quick Links

Latest Germany feature from Trade Finance Talks

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Latest Germany Trade News

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19Dec

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18Dec

Out of scope: How ESG will shake up global trade

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24Nov

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28Sep

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24Aug

Global trade in Q2 2023: OECD report highlights shifts and challenges

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18Aug

US imposes duties on Canadian, German and Chinese steel

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The U.S. Commerce Department announced on Thursday its intention to apply preliminary anti-dumping duties to tin-plated steel imports from Canada,… Read More →

07Aug

German industrial production falls in June

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German industrial production declined more sharply than anticipated in June, data released on Monday revealed, highlighting the difficulties encountered by… Read More →

01Aug

EU growth higher than expected in Q2

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23May

The growing legal imperative for human rights due diligence

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Economically disadvantaged people have been trafficked into countries as sources of “cheap” labour throughout history. The International Labour Organization… Read More →

11Apr

EU Federation & FCI join forces to promote the factoring and commercial finance industry in Europe

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The 8th EU Federation (EUF) & FCI EU Factoring Summit will take place on 20-21 April 2023 in Cologne, Germany…. Read More →

20Dec

Tradetech and deep tier financing: How emerging technology can help supply chains meet ESG standards

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Alex Gray, head of trade finance at The London Institute of Banking & Finance, explains why the staff at trade… Read More →

16Dec

Q&A | CBI’s Liliana Fratini Passi on innovation in the banking sector

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In light of the current landscape, Trade Finance Global (TFG) were delighted to have the opportunity to speak with Liliana… Read More →

05Dec

Trafigura signs $3bn loan agreement guaranteed by Germany to secure gas supply

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14Nov

Auf wiedersehen fossil fuels: Germany’s route towards LNG adoption

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In a bid to diversify energy sources and become more eco-friendly, Germany has enacted a grand push toward natural gas. … Read More →

07Nov

Commerzbank on standardisation: the key to sustainable trade finance

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The world of trade is changing. Increasingly, the topic of environmental responsibility is taking centre stage, with discourse specifically circling… Read More →

17Aug

The acceleration towards green and renewable energy through cutting ties with Russian gas

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Conflict with Russia has created a multitude of substantial repercussions for economies around the world, not least an ongoing disruption… Read More →

20Jul

Debt utilisation in European SMEs

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About the Author

Sheena is responsible for the TFG Weekly Trade Briefings at Trade Finance Global (TFG).

She loves the digitalisation of trade and is fascinated about its impact on day to day transactions.

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