Ben Milner

Trade finance can be the key to unlocking export opportunities

The number of lenders in the UK market seems to have proliferated in recent years, giving SMEs more options than ever when looking for working capital finance.

The broking market appears healthy too, with plenty of experienced people out there helping businesses navigate the ever-increasing number of options available to them.

Having worked for Scottish Pacific in both the northern and southern hemispheres, one difference that has stood out to me is how few UK businesses appear to utilise trade finance when compared to more common working capital facilities. This type of funding can help increase buying power, improve cash flow and add certainty to the supply chain. Scottish Pacific is increasing awareness of trade finance to help businesses and brokers alike take advantage of this great tool.

For instance, a flexible trade finance line, such as Scottish Pacific’s tradeline, allows businesses to fund 90% of their purchase from suppliers with repayment terms of up to 90 days. This can be cleverly utilised by businesses buying domestically or internationally from suppliers that offer early settlement discounts or price reductions to clear stock. Purchasing stock or finished goods can have a large impact on cash flow with lumpy payments being required upfront for materials that don’t get turned into cash for several weeks or months. With a tradeline facility, Scottish Pacific will pay the supplier upfront, giving the business access to the same rates as a cash buyer and allowing repayment in 90 days’ time. 

Trade finance can also support growing businesses that are often dependent on working capital facilities to support an uplift of sales. This is particularly true with businesses that receive purchase orders for goods that they have to order from overseas. Typically, an overseas manufacturer has to be paid before shipping the goods and the retailer will often pay one or two months after receiving the goods. In this scenario, a trade assist facility will pay for 100% of the goods at shipment plus tax and duty and then collect payment from the retailer. This allows the wholesaler to fulfil the order without it impacting their cash flow.

While embarking on overseas trade can be a daunting experience with plenty of uncertainty, a selective export invoice finance facility can help in two ways. First, it provides bad-debt protection to mitigate the risk of the customer becoming insolvent before paying. Second, it will advance funds against an overdue invoice to plug the cash flow gap until the customer pays. With a lower pound in recent months the opportunities for UK SMEs to export have increased and these facilities can provide invaluable support.

I would encourage any business or broker to consider the options above as they can often be the catalyst to improving cash flow and unlocking growth.

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