Trade Finance – India

2022 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

digital fuel monitoring lays the groundwork for decarbonising mines sites Digital fuel monitoring lays the groundwork for decarbonising mines sites Recognition at the COP27 climate summit that “old economy” minerals are critical to the global energy transition brings new demands for the extractive industry to track their own emissions if they are to meet internal pledges to decarbonise.
UCP 600: technical advisory briefing #4 on lost documents  Since the UCP 600’s adoption in 2007, concern has persisted over what the Article 35 rule actually requires of an LC issuer if documents get lost in transit between banks. 
RELEASED: TFG's video series in partnership with ITFA RELEASED: TFG’s video series in partnership with ITFA Behind the looking glass: trade finance insights you don’t want to miss.
2-6 Data Standards - Pradeep Nair - Standard Chartered Data standards: a key to a truly sustainable trade For sustainable trade finance to scale, the industry needs a uniform model for ESG data that can be used by everybody, says Pradeep Nair, Global Head of Structured Solutions and Development of Standard Chartered Bank
Podcast Ep 95 Featured Image SME Finance Forum GPFI PODCAST: The lifeblood of global trade: improving financial inclusion for SMEs TFG spoke to two leading policymakers at the G20 on how to improve financial inclusion for SMEs.
Is the time ripe for the formation of a global receivable exchange Is the time ripe for the formation of a global receivable exchange? In 2019, FCI formed a working group called “Receivables as an Investable Asset Class” (RIAC). It was comprised of FCI members and companies who operate as funds supporting the
TFG Weekly Trade Briefing TFG Weekly Trade Briefing, 25th July 2022 Your Monday morning coffee briefing from TFG: Is SME trade finance viable? A European outlook
End of an era India to surpass China as most populated country in 2023, UN predicts End of an era: India to surpass China as most populated country in 2023, UN predicts India is projected to surpass China as the most populous nation in 2023, according to the latest medium variant data from the United Nations Department of Economic and Social Affairs.
TFG Weekly Trade Briefing TFG Weekly Trade Briefing, 18th July 2022 Your Monday morning coffee briefing from TFG: Euro hits parity with US dollar for the first time in 20 years

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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