Trade Finance

Closing the funding gap at the beginning of your sales cycle

Trade finance is responsible for making a success out of expanding overseas by financing imports and exports. Quite simply, if purchase orders and suppliers are in place, then there is the opportunity to finance the transactions using external funds from a lender.

Is trade finance right for my business?

You can ask yourself two key questions to find out if trade finance is an option for you:

  • Have you received a purchase order that you need to fund?
  • Are you planning to import or export goods for resale?
80 to 90 per cent of world trade relies on trade finance
Financing transactions between importers and exporters

How does it work?

To make use of trade finance facilities, you need to have a confirmed order in place.  Once you have this, trade finance allows you to purchase the materials or stock to fulfil the order; you can ship the goods without being out of pocket whilst waiting for your customer to pay.

Alternatively, if you are importing, trade finance closes the funding gap between an order you’ve received from a UK customer, and the payment required by your overseas supplier.

It works to ensure that there is a trust between the buyer and the seller whilst mitigating the exposure for both.

Trade finance is sometimes called purchase order finance and can include invoice finance, supply chain finance, import finance and export finance.

Taking your business overseas

Trade finance gives small businesses an enormous opportunity to grow by funding their trade cycle and facilitating overseas transactions.

The benefits can be huge, including to:

  • Support growth plans
  • Improve profit margins
  • Increase efficiency and productivity
  • Mitigate financial risks including bankruptcy
Creating growth in overseas trading

What is stock finance?

Stock finance is not based on a single buyer and seller relationship, but on the basis of purchasing and storing stock to fulfil projected sales.  It is great for international trade because a business accesses a lender’s funds to purchase products to sell, whether it be finished goods or raw materials.

Stock finance is about the movement, purchase and sale of goods.  The lender will have security over the stock, which is likely to be held in a warehouse, for a given period of usually 90-120 days.  This revolving facility then enables a business to access cash as and when it needs it.

“Two years ago, we used Pegasus Funding Resources to raise £400,000 of trade funding. In October of this year we approached them to raise a further £250,000 and this was again arranged very quickly. Pegasus Funding Resources can be relied on, they always deliver the goods.”

Nick Clements, MD – Millstream Penthouse Systems Ltd.