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

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

5 trade finance techniques Explained: How these 5 trade finance instruments can help your business grow Letters of credit, forfaiting, factoring, export finance, and trade credit insurance: the most popular trade finance techniques companies are using in international trade
Surecomp’s Enno-Burghard Weitzel on pioneering new digital solutions for banks and corporates in trade finance VIDEO: Surecomp’s Enno-Burghard Weitzel on pioneering new digital solutions for banks, corporates in trade finance After another tumultuous year for trade finance in 2021, the industry is set to face a number of challenges – both old and new – as we head into 2022.
A world without LIBOR – Perspectives on the transition from ITFA, BAFT, JPM Almost two weeks have passed since the retirement of the world’s most important number: the London Interbank Offered Rate (LIBOR).
2021 – A Year in Review with Trade Finance Global As the clocks strike midnight, we look back at over 700 articles, handpicking our favourite stories that made the headlines in 2021
Brexit could cost UK exporters £25bn as full Covid recovery pushed back to 2023 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.
BLOG POSTS Dec 2020 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 Trade Weekly Briefing Trade Finance 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.

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

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About the Author

Trade Finance Global (TFG) assists companies with raising debt finance. While we can access many traditional forms of finance, we specialise in alternative finance and complex funding solutions related to international trade. We help companies to raise finance in ways that is sometimes out of reach for mainstream lenders.

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