There are all kinds of challenges that small businesses face and cash flow is one of the major ones. Whether you’re a start-up business or you’ve been operating a little while now, one thing which can really help that you may want to look into, is trade finance.
What is trade finance?
Trade finance is designed to help tide you over while you’re waiting for invoices to be paid.
You’ll likely have already discovered the common problem all small businesses in the trade sector face: An order comes through, so you need to get the goods from your supplier. However, the supplier requires immediate payment, but you need to wait potentially 30 days before your customers pay you. This can leave a significant cash flow issue. That’s where trade finance steps in.
It’s basically similar to a payday loan, where you receive a sum of money and you pay it back in full, plus a little interest on an agreed day. With trade finance however, you use your trade deal as proof of income and you can be paid part or all of the invoice in advance; allowing you to pay your suppliers without worrying about being short of funds.
So, you’re being paid what you should be anyway, only it gives you access to the funds much quicker.
What are the benefits?
So, why is trade finance worth looking into? Well, it provides convenience, flexibility, continuous cash flow, and security.
As soon as you’ve set up a line of credit with a trade finance company such as Touch Financial, you’ll easily be able to take advantage of it as and when you need it.
However, it’s the fact it allows you to keep a continuous cash flow that’s the real benefit. This is one of the biggest struggles which come from starting up a trade business. Many companies have been forced to close their doors because they couldn’t afford to bridge that initial payment gap.
Overall, trade finance is becoming much more popular these days. In a time where it’s difficult to get the finance you need through traditional methods such as via the bank, these trade finance deals are an excellent alternative. Provided you use a reliable company, you should find the interest rates to be very reasonable too.