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How Trade Finance Can Benefit You

5 May 2017 No Comment

Trade finance involves a lender covering upfront payments of a purchase order to a supplier (for a fee) before you receive customer payments, and is provided by companies like Touch Financial. It is not a loan since it is not you who reimburses the lender but your clients. Here are some of the benefits of this type of finance.

Ease Cashflow/Working Capital

Trade finance allows you to rest easy over supplier payments, since the lender will be covering these. This means that you have one less thing to worry about when conducting transactions, and can focus on new clients and managing other areas of the business.

This service also frees up your capital so you can reinvest in your enterprise, which will help boost growth and allow it to develop much quicker. This in turn will generate more income and prevent uncertainty over trading decisions.

Undertake Larger Jobs

Another major advantage of trade finance is that you can take on larger jobs which you might not normally have the funds to cover. If your demand is outgrowing your means of supplying, it means your business is doing well, but it can be frustrating if you lack the means to fulfil the bigger orders.

Therefore, trade finance can be that stepping stone which takes your business to the next level and allows you to accept every job which comes your way (within reason). It also prevents you from having to surrender jobs to competitors as a result of not having funds to cover them.

Combine With Invoice Factoring

Invoice factoring involves the selling of customer invoices to a factor in order to receive payment immediately (rather than waiting a set period of time). It is common for this type of financing to be used with trade finance to create a smooth system in which cash is constantly flowing into your business account.

This essentially means that your expenditure is kept to a minimum, and the factoring can finance the purchase order. You lose more money in fees this way, but there is a good chance that your accelerated rate of growth will more than make up for lessened profits.

Trade finance is a great way to keep your business moving, and can pave the way to a larger client base and improved business capabilities further down the line. Further research is a good idea if you want to explore the technicalities of this type of funding.

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