4 Ways Trade Finance Helps Small Businesses Grow

4 Ways Trade Finance Helps Small Businesses Grow

By Daniel Lewis

The problems arise somewhere in the middle: between manufacture/export and import/sales. Alternative Finance Providers help bridge the gap.

Small Business Enterprises (SMEs) are often hit by cash flow problems between the time that they export goods and when they receive payment after the importer has sold them. Trade Finance is probably the best method of bridging this gap. Alternative finance providers are becoming the go-to supplier of trade finance for small businesses.

However, there is one major obstacle for small businesses, and that is turnover. As a rule, the qualification for trade finance is companies with annual turnover between £500,000 and £50 million. It is not applicable to start-ups, and SMEs with smaller turnover need to build their annual export sales to qualify for and make the option viable. In this regard, the business needs to have at least 12 months of operation and strong product lineage, which will include planning structure.

Banks Don’t Play Ball with SMEs

Trade Finance offers the financial assistance that banks can not [will not] provide without security. The SME can source Trade Finance without having to put their assets into the ring. Often a small business will not be able to provide extra security because they are furiously busy filling orders for export. It means that they will be turned away by traditional banks.

The rapport built between the business and the alternative finance provider means that the lender will focus on the strength of the company: if they can produce, export and sell the goods for a good profit, the balance sheet, or bottom line, becomes the security base. The lender knows that the business has the means to cover the trade finance, while keeping the cash flow healthy and the growth of the company in stable condition.

Trade Finance Solution to Growth

Trade Financing is adaptable to SME international exports. The solutions often involve a range of currencies, which means that the buying and selling of products are not in pounds. With a good business plan and the right selling opportunity, it is often a matter of getting funds back from the importer, which is one area that Alternative Finance Providers can assist the SME with trade finance.

Offsets Distance Constraints

The United Kingdom has not been in the manufacturing arena for many years, as such it is one of the largest importers of goods from both Europe and the East – China and India in particular. One of the difficulties businesses in the UK has, is time to get stock shipped either imported or exported and the costs involved through shipping time can be prohibitive.

Trade Finance fits well to offset the problems and affords the best opportunity for businesses to use their alternative finance “middle man” to fill the financial limbo. Trade finance gives both ends of the transaction – exporter and importer – more chance of being profitable. It can fund against invoice or receivables, before shipping and selling.

Alternative Finance Keeps it Simple

In the past, traditional banks have taken more time than small businesses can stand for due diligence and verification. Often, only long-standing clients and multi-million-pound corporations have had the “right qualifications” for Trade Financing. The simple online method of sourcing an Alternative Finance Provider who fills the role of Trade Finance has taken SME import and export businesses to the next level, being profitable in a global economy.

As long as SMEs can cover all the requirements of selling exported and imported goods, they have a bright future, with Trade Financing forming a major part of their growth and that of the UK economy as a whole.

What We Can Do For SMEs

Does your business need Trade Finance? Finimpact.com has access to professional Alternative Funding Providers and can put you in the right place to get the additional finance you need to help your business grow and prosper.

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