What is Trade Finance?
Trade finance assists businesses who require funds at the start of a transaction in order to pay their supplier for goods which will be converted into sales. Trade finance is a very large industry and therefore covers multiple sectors, but ultimately helps settle conflicting needs of exporters and importers. The purpose of trade finance is to provide an exporter or supplier with accelerated receivables / payment for goods and an importer with extended credit, therefore removing the payment risk and supply risk. Any trading business sourcing goods from the UK or overseas could have a need for trade finance, whether it is due to experiencing seasonal fluctuations or having a funding gap that is holding them back from fulfilling their forward order book. Effectively, trade finance is a means to help complete deals or transactions that would otherwise fail to be completed, thus increasing a company’s turnover and bottom line profit.
What is Import Finance?
Import finance is an offering which pays overseas suppliers for finished goods and is particularly suitable for scenarios where there is insufficient supplier credit offered. At Davenham we are able to provide import finance in situations where goods are either pre-sold or they are regular lines supplied to regular customers. If you meet these requirements, import finance can provide your business with the required funding to fill a cash flow hole at the front end of a transaction, and Davenham can also assist with VAT upon arrival of the goods into the UK. Similar to trade finance, import finance provides the cash flow to allow goods to be purchased in order to fulfil a forward order book and ultimately generate guaranteed sales.
What is Purchase Finance?
Purchase finance can be used to pay either a UK or overseas supplier for finished and non-perishable goods that have a demonstrable exit route i.e. pre-sold goods or regular core lines. Similar to import finance, this alternative funding solution is suitable for situations where there is insufficient credit offered by a supplier and where there is a funding gap at the front end of a transaction. With purchase finance, deposits of up to 30% can also be paid to suppliers with a balancing payment upon shipment or release of goods, ultimately resulting in a deal completing and the generation of guaranteed sales.
Please refer to our Glossary for more information.