Trade Finance

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    Trade Finance | Gable Business Finance

    Introduction

    At Gable Business Finance, we help UK businesses unlock the potential of international trade with tailored trade finance solutions. Trade finance bridges the gap between exporters, importers, and financial institutions, ensuring smooth, secure transactions across borders.

    Whether you are importing goods, exporting products, or managing cross-border supply chains, trade finance provides the tools to secure payments, manage risk, and improve cash flow, allowing your business to expand internationally without financial strain.

    What is Trade Finance?

    Trade finance refers to a range of financial products that facilitate domestic and international trade. It provides businesses with working capital and risk management tools, enabling them to execute transactions safely and efficiently.

    Key Features:

    • Access to working capital to fund imports or exports.
    • Protection against payment defaults or political/economic risks.
    • Short- to medium-term financing for goods in transit.
    • Structured solutions including letters of credit, documentary collections, and trade loans.

    Trade finance is essential for businesses dealing with overseas suppliers, international buyers, or large-volume contracts, allowing them to operate with confidence in unfamiliar markets.

    Benefits of Trade Finance

    1. Enhanced Cash Flow
      Trade finance allows businesses to fund orders before payment is received, ensuring operations remain smooth and suppliers are paid promptly.
    2. Risk Mitigation
      Products like letters of credit protect against non-payment, fraud, or political risks, giving both exporters and importers confidence in cross-border transactions.
    3. Competitive Advantage
      Businesses can offer more flexible payment terms to international customers without compromising cash flow or financial stability.
    4. Access to Larger Contracts
      Trade finance enables companies to take on bigger orders that may otherwise be unaffordable due to upfront costs or delayed payments.
    5. Strengthened Supplier and Buyer Relationships
      Securing financing ensures timely payments and delivery, fostering trust and long-term partnerships.

    Types of Trade Finance

    1. Letters of Credit (LC)

    A letter of credit is a bank-issued guarantee that a seller will receive payment once the terms of the LC are met.

    Benefits:

    • Reduces risk of non-payment
    • Widely recognised in international trade
    • Can be tailored to specific shipment conditions

    Use Case: An importer buying goods from overseas can assure the supplier of payment once documentation confirming shipment is presented.

    2. Documentary Collections

    In documentary collections, the bank acts as an intermediary, ensuring payment is received before releasing shipping documents to the buyer.

    Benefits:

    • Lower cost than letters of credit
    • Secure method of handling payment and documents
    • Suitable for established trading relationships

    Use Case: A UK exporter shipping products to Europe can use a documentary collection to ensure payment before the buyer takes possession.

    3. Trade Loans and Overdrafts

    Short-term loans or overdraft facilities can fund imports, cover supplier invoices, or bridge gaps between production and payment.

    Benefits:

    • Immediate liquidity for trade transactions
    • Flexible repayment options
    • Can be combined with other trade finance instruments

    Use Case: A company importing seasonal stock from Asia uses a trade loan to pay suppliers while awaiting sales revenue.

    4. Supplier and Buyer Credit

    • Supplier Credit: The supplier provides goods on credit terms, often supported by a bank guarantee.
    • Buyer Credit: The bank finances the buyer to purchase goods, ensuring the supplier is paid upfront.

    These arrangements enable large transactions without stressing working capital.

    5. Export and Import Finance

    • Export Finance: Ensures exporters receive payment promptly or can access funds before the buyer pays.
    • Import Finance: Allows importers to pay suppliers on time while managing cash flow.

    Eligibility Criteria for Trade Finance

    Lenders typically assess the following:

    1. Business Trading History: Usually 12 months or more.
    2. Financial Records: Management accounts, tax returns, and bank statements.
    3. Creditworthiness: Company and sometimes director credit checks.
    4. International Trade Experience: Experience in exporting or importing may be preferred.
    5. Collateral or Guarantees: Some products, such as letters of credit or trade loans, may require collateral.

    Gable Business Finance guides businesses in preparing documentation and matching them to the right trade finance providers.

    How Gable Business Finance Supports Trade Finance

    1. Assessment: Understand your import/export needs and cash flow cycles.
    2. Product Selection: Identify the most suitable trade finance instrument (LC, trade loan, invoice finance).
    3. Lender Matching: Access a wide panel of banks and specialist trade finance providers.
    4. Application Support: Prepare documents, negotiate terms, and submit applications.
    5. Ongoing Advice: Monitor repayment schedules, currency risks, and trade regulations.

    Case Studies

    Case Study 1: UK Exporter to Europe

    Background: A UK-based manufacturer needed to ship goods to multiple European clients with varied payment terms.
    Solution: Gable arranged letters of credit with secure banking partners.
    Outcome: The exporter received guaranteed payments, expanded its client base, and reduced the risk of defaults.

    Case Study 2: Importing Seasonal Goods

    Background: A retailer importing Christmas stock faced cash flow issues before the holiday season.
    Solution: A short-term trade loan financed the supplier invoices.
    Outcome: Stock arrived on time, sales targets were met, and repayment aligned with revenue, improving supplier relationships.

    Case Study 3: New Overseas Supplier

    Background: A UK importer wanted to source goods from Asia but lacked prior trading history with the supplier.
    Solution: Gable structured a buyer credit facility backed by a bank guarantee.
    Outcome: The supplier shipped goods confidently, and the importer repaid through future sales, establishing a long-term supply partnership.

    FAQ – Trade Finance

    Q: What is the difference between letters of credit and documentary collections?
    A: LCs guarantee payment when conditions are met, providing higher security. Documentary collections are simpler and cheaper but rely on trust between parties.

    Q: Can start-ups access trade finance?
    A: Yes, particularly for domestic trade or with bank-backed guarantees. Gable guides new businesses in structuring applications.

    Q: Is trade finance suitable for small orders?
    A: Typically, trade finance is used for significant transactions due to administrative costs, but smaller companies can still access tailored solutions.

    Q: Are international trade risks covered?
    A: Yes, trade finance instruments mitigate risks such as non-payment, currency fluctuations, or political instability.

    Q: How quickly can funds be accessed?
    A: Depending on the instrument, approval can be 24–72 hours for trade loans or a few days to weeks for letters of credit.

    Why Choose Gable Business Finance?

    • Expertise: Specialists in UK trade finance and international transactions.
    • Wide Network: High-street banks, trade finance providers, and specialist lenders.
    • Tailored Solutions: Products matched to cash flow, trade volume, and risk profile.
    • Transparent Process: Clear terms and guidance throughout.
    • Ongoing Support: Advice on future trade finance needs, currency hedging, and international regulations.

    The Next Steps…

    1. Contact Gable Business Finance with your import/export requirements.
    2. Provide business accounts, trading history, and projected invoices.
    3. Receive tailored trade finance solutions from multiple providers.
    4. Complete the application and unlock funding for international growth.