Trade Finance – United States

2021 Guide | Trade Finance Global

Trade Finance - United States

Welcome to the US Trade Finance and International Trade hub. Find out how our United States 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 US-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 US team



If you have a trade finance enquiry, please use the contact form below to get in touch with our US team.

 

Finance Queries:

us.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 US 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 North America region right here.

From the Editor – Trade Finance Insights

VIDEO: Factoring strikes back – FCI’s Aysen Çetintas on expanding trade finance education after COVID-19 In 2020 the global factoring industry saw a 6.5% drop in volume – its largest one-year decline on record. 
TFG’s Accelerate Scholarship is back! TFG brings back $1,000 Accelerate Scholarship due to high demand to bridge the trade skills gap 
VIDEO: Steady, dynamic growth – Santander’s Bertrand de Comminges on why corporates are moving into supply chain finance After another year of disruption for much of the global economy in 2021, one sector that has emerged mostly unscathed – except for one high-profile collapse – is supply chain finance.
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 struck midnight, we took a look back at over 700 articles, handpicking our favourite stories that made the headlines in 2021
A new vision for inclusive trade addressing inequalities and global reform A new vision for inclusive trade: addressing inequalities and global reform Divides and discrimination within countries along the lines of race, ethnicity, gender and Indigenous identity have resulted in longstanding social, economic and political challenges.
Trade Finance talks John and Deepesh PODCAST: Chief Economist insights – Are iron ore prices propping up global trade? World trade of goods has declined some 12% in the last year, representing a loss of $22 trillion USD of trade. Is it all doom and gloom for trade, or will we see a resurgence?
TFG Weekly Trade Briefing TFG Weekly Trade Briefing, 26th July 2021 Your morning coffee briefing from TFG. Service trade slump continues as travel wanes, however, some sectors appear to be recovering
TFG Weekly Trade Briefing TFG Weekly Trade Briefing, 17th May 2021 Your morning coffee briefing from TFG. Global inflation troughed last summer, and has risen markedly since. Britain, Ireland agree to work together to smooth post-Brexit trade and the US Colonial pipeline resumes operations following ransomware attack.

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 US Trade News

25Jan

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04Jan

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08Nov

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03Nov

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22Oct

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21Oct

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12Oct

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11Oct

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30Sep

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29Sep

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22Sep

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15Sep

Summary: DIT’s Global Trade Outlook and the Future of International Trade

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06Sep

TFG Weekly Trade Briefing, 6th September 2021

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Your morning coffee briefing from TFG. Exports of intermediate goods sustain gains in Q1 of 2021 after rebound from pandemic,… Read More →

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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