Want to learn more about trade finance? Trade finance refers to different types of activities, like forfeiting, factoring, and lending that involve a buyer and seller, or importer and exporter. Trade finance facilitates commerce while taking away some of the risks of an honor-system transaction between a company and consumer. 

Here are some things beginners need to know about trade finance: 

Expedites Payment 

Trade finance contributes to faster payments, which is key for preserving fiscal health and thriving as a small business. Trade finance ensures orders have been shipped, so payments can be made promptly. Sometimes, payment precipitates actual receipt of goods so that goods can continue to flow and be disseminated during that period.  

Reduces Pressure  

When it comes to the importation and exportation of goods, trade finance helps reduce pressure and alleviate the worry that the importer could default. This means an exporter can ship goods with confidence that they will be paid since it has been verified and endorsed by a trade financier.  

Varied Services 

Trade financiers are usually financial institutions, like banks. They offer a variety of products and services that help facilitate commerce and keep both the buyer and seller happy. Some ways that these trade financiers help include letters of credit providing assurance that goods have been sold and shipped. Additionally, these financiers can serve as a guarantor, which also helps bring peace of mind to parties involved in international business exchanges.  

Involves Factoring  

Factoring in trade finance is the same kind of arrangement as seen in other factoring situations. The exporter sells open receivables and invoices to the financier- when payment is made by the receiver of the goods or the buyer. The financier receives their money when this occurs. It takes a lot of the risk out of invoicing for exporters, in this situation.  

There is a lot to know about trade finance. Need more information? Talk to the lenders at Means Commercial Capital about alternative funding options for your company, business, or brand. Call or visit today.