Avoiding Upfront Payments when Importing for Business

August 2022

Importing stock or equipment for your business can present logistical headaches. These have been magnified as disruptions to global trade stemming from COVID and world political action continue to impact cross-border commodity movement.

Disrupted supply chains, increased delivery costs, and delays in waiting times can all add significant financial strain to your business operations.

Challenges facing businesses importing stock

While many Australian businesses rely on global suppliers to source consumer products and equipment, they must contend with:

  • Fluctuations in foreign currencies
  • Increasing freight costs
  • Disrupted travel routes
  • Shortages in raw materials.

Given the uncertainty of the global trade landscape, suppliers usually require upfront payment. This, however, could impact your cash flow, particularly if you’re waiting longer than normal for stock to arrive.

But there is another option.

What is trade finance?

Companies can use a form of finance to facilitate international trade and commerce. Trade finance is a way of paying suppliers for stock or equipment upfront without spending your working capital. This means businesses have time to sell the stock after it arrives in Australia and then make the repayment.

Trade finance involves a third-party financial institution extending credit to an importer (or business) to fulfil a trade order. The institution pays the exporter according to an agreement between them, the business, and the financial institution. The business repays funds at a later date as per the agreed terms.

Trade finance is popular with businesses – up to 90% of the world’s trade relies on this financial solution, according to the World Trade Organisation.

Benefits of trade finance

Trade financing helps businesses such as yours to:

  • Take advantage of trade opportunities to boost business and trade
  • Potentially earn discounts from suppliers when making bulk purchases
  • Better manage the risk of falling behind on payments and losing a key supplier or customer
  • Remain agile and create a convenient cash flow buffer in times of financial strain
  • Access more flexible funding than conventional finance or credit issuance
  • Pay back trade finance after you’ve sold the goods and received payment from your customer.

Speak to your us

Trade finance could be an effective way for your business to close the cash flow gap when importing stock, or equipment from overseas. Get in touch and find out how we can help you access the best finance options for your business.

The information in this post is provided for general information only and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from financial, legal and taxation advisors. Although every effort has been made to verify the accuracy of the information as at the date of publication, Geared Finance, its officers, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy, or omission from the information for any reason, including due to the passage of time, or any loss or damage suffered by any person directly or indirectly through relying on this information.