Trade finance: How it works and how to find a lender.

Trading is no easy business. It involves complicated analysis of market conditions, a close monitoring of cultural and commercial situations, and a reliance on fluctuating exchange rates. So when it comes to the actual transaction, you want to make sure you’re using a service that you can rely on. This article will take you through the features of trade finance, how to compare a lender’s trade finance offerings, and how to find the best service for you.

What is trade finance?

Trade finance is a service offered by a provider for people and businesses who engage in international transactions. They may offer services in addition to lending such as technology to manage finance, financial advice and risk management services.

How does trade finance work?

As domestic and international trade is a volatile marketplace, it’s quite common for businesses to use finance for international transactions. There is significant fluctuations in cash flow for these businesses, and there is little certainty with market conditions and foreign exchange rates, so trade finance comes with more flexible terms and amounts compared to other financing solutions.

Trade finance, though, is not limited to lending. To engage in business overseas, you will need to use the services of a financing institution, but the level and type of services you use will be up to you. Some providers that offer trade finance services usually have a range of options available to you, and you are able to choose the products that will meet your business needs. Some of these services may include transactional technologies, research and analytics, trade finance facilities, and also, advice.

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Fora Financial business loans Finder Rating: 4.1 / 5: ★★★★★			$5,000 – $500,000	Varies	6+ months in business, $12,000+ monthly revenue, no open bankruptcies	Get qualified for funding in minutes for up to $500,000 without affecting your credit score. Best for companies with at least six figures in annual revenue.	Go to site More Info	Compare	loading Fetching your data…
Lendio business loans Finder Rating: 4.75 / 5: ★★★★★			$500 – $5,000,000	Starting at 6%	Operate business in US or Canada, have a business bank account, 560+ personal credit score	Submit one simple application to potentially get offers from a network of over 300 legit business lenders.	Go to site More Info	Compare	loading Fetching your data…
National Funding business loans Finder Rating: 4.75 / 5: ★★★★★			$5,000 – $500,000	4% to 8%	Be in business at least one year and make at least $150,000 in annual sales. Other loan types have additional requirements.	Working capital loans and equipment financing, some high-risk industries may be eligible.	Go to site More Info	Compare	loading Fetching your data…
Fundbox lines of credit Finder Rating: 4.2 / 5: ★★★★★			$1,000 – $150,000	Not stated	6 + months in business, $100,000+ in annual revenue, 600+ credit score	Get flat rate, short-term financing based on the financial health of your business, not your credit score.	Go to site More Info	Compare	loading Fetching your data…
Bitty Advance business cash advances Finder Rating: 2.8 / 5: ★★★★★			$2,000 – $25,000	Not applicable	$5,000 monthly bank revenue, 6+ months in business, business bank account open 3+ months, 450+ credit score	With APRs in the triple digits, this is best saved as a last resort.	Go to site More Info	Compare	loading Fetching your data…

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What are the types of trade finance?

• Trade loan. If you’re in the import and export business, a trade loan can help you manage cash flow by working as a line of credit to be accessed in between selling goods and receiving payments.
• Foreign exchange. Foreign exchange includes services for transactions, forwards and options that can help protect your business against unfavorable market changes, while also taking advantage of favorable currency movements.
• Domestic trade services. This type of trade finance can fund domestic suppliers and support trading cycles within America.
• Export services. Exporters may require documentary collections, letters of credit, collection negotiations, working capital guarantees, and financing solutions both pre- and post-shipping.
• Import services. Businesses involved in importing may take advantage of documentary letters of credit, documentary collections and trade finance.
• Cash flow services. These services include the management of foreign currency accounts, the facilitation of foreign currency overdrafts and telegraphic transfers.

Do you receive supplies from overseas? Compare inventory financing options

How do I compare trade finance providers?

• Available currencies. Check if the provider can process transactions in the currencies you and your customers use.
• Interest rate. You should check how often the interest will be calculated, which will ideally be daily, and you should also see how the interest rates for one provider weighs up against others.
• Repayments. The timing of your repayments will work differently between providers, for instance, some may require you to pay at full maturity. This timing may impact your cash flow, so keep this in mind. You may want to choose a provider that offers a repayment structure that won’t have a negative impact on your business’ financials.
• Financing terms. The financing terms for pre- and post-shipment finance will differ between lenders, and pre-shipment finance generally has shorter terms. Check the terms available before you apply to see if they will work for your business.

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What are the pros and cons of trade finance?

Bottom line

Read the fine print before applying for any trade finance services to see any restrictions, especially as many of these services will need to be applicable internationally. For instance, some providers will only arrange spot and forward foreign exchange purchases for approved clients, so this is something that you would need to consider before you apply.