Menu
Trade invoice financing is a strategy that businesses use to improve cash flow and free up working capital, as follows:
See above.
Trade finance facilitates international transactions, providing financial services and techniques that mitigate political/commercial risks. Financial products are supplied, allowing seamless transactions, including:
Examining invoice finance vs trade finance further, we find that trade invoice financing focuses on domestic transactions to generate cash flow. In contrast, trade finance is geared towards international trade/cross-border transactions.
Delays in invoice payments can wreak havoc on a company’s cash flow, and immediate access to funds negates that delay.
Businesses can use invoice trade finance when it suits their purposes. There are no long-term commitments or other restrictive conditions.
An influx of instant cash means a business can accept increased orders and expand without waiting for clients to pay their debts.
Before applying for trade and invoice finance, knowing precisely how much financing you need and determining which upcoming invoices fit the bill is critical.
This is where experts like those at MGB Public Accountants can be invaluable. Understanding the precise terms and conditions of each shortlisted provider is crucial in choosing wisely, and experienced, skilled accountants are an excellent resource.
Take expert advice and use your research to select a reputable bank, trade financing company, bank, or other lender. Some essential factors to take into account include:
Some documents you will likely need for any invoice trade finance application include:
Request a trade invoice financing application form from your preferred provider. Read through it carefully (with the assistance of an experienced accountant if possible). Fill the form out carefully and note any fine print. Include the necessary documents and submit everything together.
Your chosen provider will review your application and perform due diligence according to their governance. This will include credit checks on the clients whose invoices you use as collateral. Although the approval process for trade and invoice finance is relatively fast, the exact time will depend on the provider and the complexity of your application. You should anticipate a minimum of two days for a response.
Accurate, up-to-date financial records indicate your reliability as a candidate and will help ease any concerns the provider may have.
All the information you need to accurately calculate the cost of your invoice trade finance agreement will be provided in advance. If the complexity is beyond your capabilities, engage the services of reliable, reputable accountants like those at MGB Public Accountants to ensure reliable numbers.
Make clear, concise communication a non-negotiable element of all your financial dealings. This includes informing your clients of the arrangement and your finance provider.
Invoice trade finance is commonly used across various industries to improve cash flow and manage working capital. Among others, some of the industries that commonly use invoice trade finance include:
You should receive a response within 48 hours and the funds shortly thereafter.
Yes, some of the risks involved include:
If your clients fail to pay their invoices, you may be responsible for repayments.
Interest rates and provider fees can be high, negating your profit margin.
Leaning on trade invoice finance too heavily can lead to dependency, affecting your ability to generate cash flow the traditional way.
Some customers might not appreciate paying an outside party, negatively affecting your business relationship.
Some of the fees you should expect to encounter include:
Invoice financing
A set percentage of the invoice’s value will be charged (from 0.5% to 4%)
A fee for the advanced funds (1% to 3% per month)
Client transfer fees (1% to 5% depending on timing)
Setup, administration, and credit check fees
Trade financing
Typically a set fee, but look for additional charges (a percentage of the transaction value).
Similar to any loan
Each trade transaction will incur a fee based on complexity/volume.
Trade credit insurance is required to protect against non-payment risk.
Yes, combining them is commonplace and can be highly effective.
