What is Trade Finance?
Types of Financing
There are many different types of corporate finance solutions provided by variety of financial institutions and/or non financial institutions.
Financing based on the cash flow generated from the various commercial transtions between businesses.
To finance based on the past business performance and credibility.
Asset Backed Finance
To finance based on the asset that a business owns.
ie. Real Estate
To finance based on the future cash flow of a company or project.
Traditional trade finance transaction occurs in numerous steps and requires coordination of multiple stakeholders. The number of steps and difficulty of each step stand as an obstacle for many SME's to obtain the support to run their business effectively.
3. Financing agreement/ Loan
5. Transaction fee payment less loan balance and interest
4. Inspection of goods/ Payment
1. Commercial Agreement
2. Delivery of Goods
1. From the point that the seller delivers the products to the buyer, there is an opportunity cost for the seller due to the amount of time (1~6 months) that it takes to complete the transaction and receive the payment. If the seller is able to receive funding during this time, they would be able to start on a separate deal.
2. Healthy SME's find difficulty in borrowing funds from traditional financial institutions due to multiple reasons. Some include inability to request for small transaction amounts, lack of relationship with that particular institution, and also simply because financial instructions have better choices of clients to conduct business with.