Trade Finance – United Arab Emirates

2021 Guide | Trade Finance Global

Trade Finance Global / Trade Finance – United Arab Emirates

Trade Finance - United Arab Emirates

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



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

 

Finance Queries:

uae.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 UAE 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 MENA region right here.

From the Editor – Trade Finance Insights

World of Open Account (WOA) cofounders on the changing face of receivables finance World of Open Account (WOA) cofounders on the changing face of receivables finance TFG’s Annie Kovacevic sat down with World of Open Account (WOA) cofounders John Brehcist and Erik Timmermans. 
Getting it right - Malaysia's highest court restores trial court decision in UCP 600 case Getting it right: Malaysia’s highest court restores trial court decision in UCP 600 case Further to the decision made in the Court of Appeal Malaysia (appellate jurisdiction) between Punjab National Bank (PNB) and Malayan Banking Berhad (Maybank), Maybank has successfully obtained leave from the Federal Court of Malaysia Putrajaya to file an appeal against the decision made in the Court of Appeal Malaysia
mining sector experiencing profit squeeze Mining sector experiencing profit squeeze despite commodities boom Analysts are seeing the recent drop in earnings by the world’s biggest mining companies as a sign that the days of bonanza dividend payouts are over.
Ships, sanctions, and suspicious vessels - How AIS and other trickery is confounding compliance PODCAST: Ships, sanctions, and suspicious vessels – How AIS and other trickery is confounding compliance In our latest podcast, TFG’s Deepesh Patel spoke with Saskia Rietbroek of ACSS and Michael Byrne of IIBLP on sanctions busters, sanctions compliance, and new maritime guidance for financial institutions
TFG Weekly Trade Briefing TFG Weekly Trade Briefing, 14th February 2022 Among last week’s top stories, the Trade Finance Global International Trade Awards 2022, in cooperation with BAFT, announced that nominations are now open
Digital Transformation- A Powerful Tool for Growth in the Middle East Digital Transformation: a powerful tool for growth in the Middle East Trade and economic activity are advancing at a rapid pace across the Middle East. How are governments across the region evolving and harnessing opportunities to enable high-speed economic activity?
TFG Weekly Trade Briefing TFG Weekly Trade Briefing, 24th May 2021 Your morning coffee briefing from TFG. World trade’s recovery from the COVID-19 crisis hit a record high in the first quarter of 2021, increasing by 10% year-over-year and 4% quarter-over-quarter. WTO Director General calls for action on trade finance in low to middle-income countries.
TFG Weekly Trade Briefing TFG Weekly Trade Briefing, 6th April 2021 Your Monday morning coffee briefing from TFG. The WTO is forecasting growth in global merchandise trade of 8.0% this year following a contraction of 5.3% in 2020.
TFG Weekly Trade Briefing TFG Weekly Trade Briefing, 29th March 2021 Your Monday morning coffee briefing from TFG. A container ship ran aground, blocking the Suez Canal which carries about 12% of global maritime trade. The blockage may take some time to clear, further disrupting global shipping, already beset by high freight costs and delays caused by the pandemic.

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 UAE trade team

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Quick Links

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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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