For Australian importers, the potential for business growth from international markets is huge, but success depends largely on your purchasing power. If you have to fund this growth using your company’s internal resources alone, you’ll often be left behind by competitors who use trade finance.
When you venture into the global market, things can of course go wrong overnight. Exchange rates move against you, better-financed competitors around the world can outbid you, trade laws, duties and tariffs change, your suppliers raise their prices or even go out of business.
But things can suddenly go right too. Exchange rates move in your favour, your suppliers unexpectedly offer special discounts, or demand surges for your imports at home which presents opportunities which you can take advantage of.
These are the times when you need to be there, on the spot, with cash in your pocket to seize the moment. It is trade finance that gives you the speed you need, but in its traditional forms such finance can be risky, expensive or slow – and sometimes all three.
Traditional financing arrangements
At the most secure end of the spectrum – for you as the importer – is open account, where you pay your supplier only after the goods are safely landed. But exporters, in trying to manage risk and their own cash flow, are understandably reluctant to sell on these terms, especially to first-time customers or infrequent buyers because of the credit and insolvency risk.
At the opposite end is cash in advance, where you have to pay the exporter even before your goods are loaded for shipping. Your supplier may be smiling, but you’re taking all the risk and are out of pocket until you can turn that stock into cash – perhaps weeks but more likely months later. This is the experience of most importers, particularly smaller-scale operations.
In between are relatively common methods such as letters of credit, under which banks act as intermediaries but usually demand collateral before issuing the letter of credit and take a fee as well, however these facilities do not have an impact on your ability to access finance quickly to take advantage of opportunities.
In a world where agility and speed is increasingly important to determining business performance and success, newer methods are emerging to assist businesses in financing their operations.
Shorten your cash flow cycle and boost buying power fast with Tradeline
A simpler, more flexible and cost-effective form of trade finance is a line of credit, such as a facility from Tradeline. You can get an approval, usually within five working days, for amounts up to $2 million, without providing security such as a mortgage or a charge over your company.
When you close a deal, Tradeline advances funds to pay the supplier on the date the goods are shipped, and then gives you up to 90 days to pay down the line of credit.
In that time, you can take possession of the goods and deliver them to your customers. In effect, Tradeline allows you to turn your cash flow cycle on its head – you sell your stock first and pay for it later.
Your finance is then available for you to use again, and again. You can use it for all sorts of goods, both raw materials and finished goods, and to pay local suppliers as well as suppliers from overseas.
A range of supplier payment options are available, including telegraphic transfer, letters of credit and bank documentary collection, and payment can be made in a variety of currencies.
Finance for a competitive edge in Trade
Your suppliers are happy because they have improved cash flow and zero credit risk and you have the ability to purchase more.
Your customers are happy because you are fast and reliable, which encourages repeat purchase. If a regular supplier lets you down, for instance, you have the purchasing power to find replacement goods without delay.
You should be happy too, when by leveraging this line of credit you can take advantage of temporary bulk discounts, changes in pricing or exchange rates or other positive events which can help you capture margin. Your business is in a much stronger position as a result.
In fact, the only people feeling less than delighted are probably your competitors who, without import finance, are left waiting for their customers to pay for their last deliveries before they can go out and buy the next lot, or have found that supply is no longer available as it has been bought up.
Trade finance from Tradeline ensures you always have funds at the ready to respond to emergencies and exploit opportunities. By recycling your working capital so efficiently, you can turbo-charge your purchasing power and grow your business at a rate that would otherwise be out of reach.