Trade finance

Trade finance is an umbrella term, encompassing many financial products utilised by banks and companies to make trade transactions feasible. It represents the financial instruments and products used by these companies to help facilitate trade and commerce.

Trade finance makes it possible and easier for importers and exporters to transact business through trade. These services bridge the financial gap between the importers and exporters, adding a third party to the mix and in doing so reducing risk.

The different parties involved in trade finance include banks, trade finance companies, importers and exporters, insurers and export credit agencies.

Examples of trade finance products and services

  • A letter of credit
  • Forfaiting
  • Lending
  • A bank guarantee
  • Export credit

Benefits of trade finance

  • Improves cash flow and efficiency of operations
  • Increases revenue and earnings
  • Reduces risk associated with global trade by reconciling the needs of exporters and importers
  • Reduces the risk of financial hardship