The traditional method of commercial lending assessment places importance on the ability of the borrower to repay the financier. However, this form of evaluation often results in insufficient credit appetite to release the required level of financial support for a company involved in international trade.
When a trade proposition is properly evaluated, the transactional risks identified and mitigated to an acceptable level, and a well-structured, self-liquidating trade and receivables finance facility deployed, this can reduce the risk of default for the bank and generate increased levels of credit appetite to provide corporate finance. This is achieved by controlling the release of funding and securing an identifiable and reliable source of repayment from the financed transaction.
Trade finance provides a company with a scalable source of working capital finance linked to the value of orders received and not by the size of their balance sheet and available security. The amount of funding is determined by the transactional needs of the company rather than fixed by the assessment of their ability to repay the financier.
However, the structured alignment of funding to the trade cycle enabling the purchase of raw materials, components, and finished goods to fulfil an order and the capture of the subsequent sales proceeds to repay the bank requires specialist skills. Unfortunately, knowledge of the trade products and financing techniques to bridge the ‘credit gap’ is concentrated into a relatively small number of specialists.
Our aim is to make trade finance more accessible and better understood via our training courses, our books, and consultancy services.
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