Trade Finance – Germany

2021 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

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Partnership Queries:

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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

ITFA and Sullivan & Worcester issue joint guidance on the use of Risk-Free Reference Term Rates in Trade and Export Finance The guidance note looks at Term SOFR (SOFR is the Secured Overnight Financing Rate), the ARRC recommended RFR term rate
Open Banking: Forget about cloud and APIs – it’s all about value generation The trade finance space has seen a huge influx of capital in the development of fintech solutions to address some of today’s most pressing trade challenges.
Fireside chat: Contour, on platforms, competition and the misconceptions of interoperability The need for trade digitization has never been more prevalent than it is today, especially with pandemic-induced restrictions emphasizing the inefficiency of paper-based trade. Our Editor, Deepesh Patel sat down with Contour’s CEO and Chief Product Officer, as well as TradeLens’ Head of Strategy and Operations, to discuss how fintech can come together to partner to solve these problems.
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 application of blockchain in trade finance: opportunities and challenges The present article discusses the potential benefits of using blockchain technology for trade finance activities and highlights significant challenges facing the blockchain’s adoption
TFG Weekly Trade Briefing, 9th November 2020 The presidential transition period which lasts until 20 January will freeze talks on a UK-US trade deal Numbers of new confirmed Covid cases continued to rise in the US, Germany and Italy.
euf x fci EUF and FCI held their first online EU Factoring Summit EUF plays an important role for our industry today more than ever and confirming FCI’s support regarding the lobbying of the new definition of default with the EBA.
FCI insights Podcast: FCI – Views from the Board, Factoring and Receivables TFG’s Deepesh Patel caught up with FCI’s Chairman, Mr. Patrick de Villepin, and FCI Vice Chairman, Mrs. Daniela Bonzanini, on the critical role of Receivables finance industry in the recovery of global trade growth during this challenging period.
Wirecard’s Travails and Lessons for the Trade Finance Community Wirecard is suspected of misleading investors through aggressive accounting practices including inflating sales and revenue in order to appear to be performing better than it is actually doing.

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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Latest Germany Trade News

14Sep

Euler Hermes: 15% of UK SMEs at risk of insolvency in the next four years

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Euler Hermes’ newest research found that 15% of the UK’s SMEs are at risk of insolvency in the next four… Read More →

27Apr

Moving to the cloud: Volkswagon’s TRATON migrates trade finance to improve efficiencies

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Surecomp®, the leading provider of global trade finance solutions for banks and corporates, today announced that automotive multinational TRATON SE… Read More →

21Apr

FCI reports 6.6% drop in global factoring statistics in 2020

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The first estimates for the factoring industry worldwide in 2020 have been announced today by the FCI’s Peter Mulroy. Factoring… Read More →

16Mar

Using education to make factoring more inclusive

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Teaching businesses to unlock working capital and grow their operations through factoring education programmes (FCI)
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16Mar

Optimism for global trade in 2021

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From vaccine roll outs to growth in emerging markets, there are plenty of reasons to stay positive this year.
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09Feb

Coface credit insurance predicts uneven recovery from Covid crisis

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Paris, February 9, 2021 – In its County & Sector Risk Handbook, Coface, a leader in credit insurance has predicted… Read More →

12Jan

Report: Brexit could cost UK exporters £25bn as full Covid recovery pushed back to 2023

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The UK’s exporters could face a Brexit bill worth as much as £25bn in lost revenues in 2021, according to… Read More →

11Dec

Report: After Covid-19 disruption, hedging supply chain risks is a top priority; less than 15% of companies consider reshoring production

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Covid-19 lockdowns have disrupted global supply chains across the board and placed the concepts of reshoring and resilience on every… Read More →

30Nov

Deutsche Bank sees rebound in trade finance volumes post Covid-19

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Deutsche Bank sees global trade finance volumes rebounding by more than 7 percent in 2021. Deutsche Bank’s Head of Trade… Read More →

23Nov

Citi Launches Green Deposits, a New Sustainable Investment Solution

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Citi Treasury and Trade Solutions announces the launch of a green time deposit product with enhanced yield…. Read More →

17Nov

The application of blockchain in trade finance: opportunities and challenges

0 Comments

The present article discusses the potential benefits of using blockchain technology for trade finance activities and highlights significant challenges facing… Read More →

09Nov

TFG Weekly Trade Briefing, 9th November 2020

0 Comments

The presidential transition period which lasts until 20 January will freeze talks on a UK-US trade deal Numbers of new… Read More →

06Nov

EUF and FCI held their first online EU Factoring Summit

0 Comments

EUF plays an important role for our industry today more than ever and confirming FCI’s support regarding the lobbying of… Read More →

29Oct

Deutsche Bank draws up the world’s first ESG FX derivative framework agreement for Primetals Technologies

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− Initial term of the framework agreement is four years− Transaction complies with the terms of Deutsche Bank’s new SustainableFinance… Read More →

15Oct

Podcast: FCI – Views from the Board, Factoring and Receivables

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TFG’s Deepesh Patel caught up with FCI’s Chairman, Mr. Patrick de Villepin, and FCI Vice Chairman, Mrs. Daniela Bonzanini, on… Read More →

21Aug

Euler Hermes survey – Four in five UK CFOs “unprepared” for Covid-19 sales slump

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80% of UK CFOs say they’re not fully prepared to manage the impact of the risk on their business caused… Read More →

13Jul

Wirecard’s Travails and Lessons for the Trade Finance Community

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Wirecard is suspected of misleading investors through aggressive accounting practices including inflating sales and revenue in order to appear to… Read More →

10Jul

UK inward investment projects increase in 2019

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Figures from the Department for International Trade published today (10 July), show the UK attracted 1,852 new inward investment projects… Read More →

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