What's different about a Spotcap finance solution
How a credit facility from Spotcap works
Trade finance from Spotcap is in the form of a credit line. This allows you to draw down amounts of credit when you need it, with each drawdown becoming a separate business loan
Spotcap line of credit calculator
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How Spotcap customers have used their credit facilities
Compatible accounting softwares
Understanding trade finance
Information for business owners in importing & exporting
What is trade finance?
- Trade finance makes it easier to buy and sell across borders. It’s a broad set of financial tools that meet the needs of importers and exporters of both finished goods and raw materials. The World Trade Organization (WTO) estimates that 80 to 90% of global trade relies on trade finance. Letters of credit, bills of exchange and loans are all elements of this type of finance.
- What they have in common is that they are all concerned with ensuring businesses have access to working capital when they need it. When finance isn’t available, it restricts the capacity of a business and the profits it is able to turnaround.
- Due to the high nature and demand of trade finance, importers and exporters often need to be agile with cash management to handle fluctuations in the industry. By providing vital liquidity, credit and insurance, trade finance helps keep the wheels of international commerce turning.
What are the benefits of trade finance for importers and exporters?
- Trade finance has many advantages for firms that import and export. By providing a stream of working capital it enables businesses in both fields to manage their day-to-day running costs. Trade finance can allow an importer to buy stock in bulk up-front, and an exporter to buy more inventory to sell. More working capital and a well-managed cash flow aids the growth of a business, allowing it to fulfil larger transactions that normally wouldn’t be possible. This can, in turn, potentially increasing profit margins.
- Since importers are obliged to pay for goods before they are shipped, the importer requires liquidity to pay the exporter’s invoice, as well as security that the goods will arrive. The importer’s bank can help by providing a letter of credit to the exporter, which provides working capital for the importer and mitigates their risk. An exporter’s bank lend money to an exporter on the basis of an export contract.
Can trade finance mitigate risk?
- Trade finance facilities act as safety nets, offering a degree of protection to buyers and sellers in an international marketplace. They assist in the fulfilment of transactions that may involve several currencies and multiple stakeholders.
- More specifically, trade credit, political risk insurance and credit insurance are products that temper commercial risks that arise from conflict and instability. Credit insurance helps recover all or part of a receivable, while political risk insurance protects businesses that purchase from potentially unstable regions.