Trade Finance – India

2023 Guide | Trade Finance Global

Trade Finance - India

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



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

 

Finance Queries:

in.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 India 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

Navigating climate risks The role of CRDCs in sovereign debt management Navigating climate risks: The role of CRDCs in sovereign debt management The increasing frequency, intensity, and unpredictability of climate crises have significant implications for the sustainability of sovereign debt due to the impacts on debtors’ repayment abilities.
VIDEO | Revolutionising trade documentation: Secro’s game-changing solution for eBLs For centuries, trade documentation has been a time-intensive and resource-demanding process, involving a multitude of stakeholders and a deluge of paperwork. Central to this process is the bill of lading, the most critical document in international trade. 
digital trade documents lloyds sponsored feature Lloyds Bank completes first digital trade transaction under new UK legislation Lloyds Bank has completed what it believes to be the first transaction under the UK’s new Electronic Trade Documents Act (ETDA) which came into force today [20 September 2023]. 
TFG Weekly Trade Briefing, 18th September 2023 Your Monday morning coffee briefing from TFG, 18th September 2023.
TFG Weekly Trade Briefing, 4th September 2023 TFG Weekly Trade Briefing, 4th September 2023 Your Monday morning coffee briefing from TFG, 28th August 2023.
Trade Briefing 28 Aug 2023 Featured TFG Weekly Trade Briefing, 28th August 2023 Your Monday morning coffee briefing from TFG, 28th August 2023.
Almond ailments Can New York courts crack IOB's jurisdiction shell Almond ailments: New York courts find jurisdiction a hard shell to crack Does a New York court have jurisdiction over an Indian collecting bank that is alleged to have violated the Uniform Rules for Collections (URC 522) for neither collecting and remitting funds to pay for shipments represented by the documents forwarded to it nor returning originals of several of the documents sent to it for collection? 
Trade Briefing 21 Aug 2023 Featured TFG Weekly Trade Briefing, 21st August 2023 Your Monday morning coffee briefing from TFG, 21st August 2023.
Trade Briefing Featured 31 Jul 23 TFG Weekly Trade Briefing, 31st July 2023 Your Monday morning coffee briefing from TFG, 31st July 2023

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 India trade team

Speak to our trade finance team

Quick Links

Download our free trade finance guide



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About the Author

Joana Fabiao is the Marketing Manager at Trade Finance Global (TFG).

She holds a BA in International Business from the University of Westminster, with a core focus on Global Economic Issues, International Financial Management and Organisational Behaviour. She also holds a certificate in Bloomberg Market Concepts.

Prior to working at TFG she worked as Junior Consultant in the Marketing and Events Department at Westminster Business Consultants, focusing on their social media campaigns, content and marketing strategy.

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