Trade Finance

Whether you're importing or exporting, any business that relies on trading can experience cash-flow shortages. Trade finance takes care of these gaps in cash flow, allowing your business to import or export goods with ease. There are a number of trade finance options available, including import finance, export finance, letters of credit, payment-in-advance and payment against documents.

What is trade finance?

Trade finance is an umbrella term for a number of working capital finance solutions that help protect businesses against risks associated with importing or exporting. Trade finance aims to bridge gaps in cash flow that may otherwise cause working capital problems. This could be due to risks such as fluctuations in currency, political instability, non-payment and creditworthiness of one of the parties involved.

How does trade finance work?

As domestic and international trade can be volatile, it is common for businesses to use trade financing to improve their operations. With trade finance, banks and financial institutions act as intermediaries between the buyer and seller, providing a range of solutions addressing the complications that may arise while trading. It helps importing and exporting businesses manage cash-flow issues that may arise due to changing marketing conditions and foreign exchange rates. Compared to other finance options, it also offers more flexible terms, taking into account the peculiarities of domestic and international trade.

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Finder Score	Min. Loan Amount	Max. Loan Amount	Loan Term	Upfront Fee	Filter Values
8.2 Great Valiant Finance Business Terms Loans	8.2 Great	$5,000	$500,000	3 months to 3 years	Variable, starting from $0		Enquire nowView details Compare product selection Compare	loading
6.2 Standard ScotPac Invoice Finance	6.2 Standard	$200,000	$200,000,000	1 to 2 years	Establishment fee 1% of the limit		Improve your business cash flow by financing your outstanding invoices. No minimum trading history required, but minimum 12 - month term and $200,000 in invoices.	Go to siteView details Compare product selection Compare	loading
ScotPac Selective Invoice Finance			No maximum amount				Finance your unpaid invoices on demand with terms of - months. 95% of invoice is paid upfront, with no minimum trading history required.	Go to siteView details Compare product selection Compare	loading
6.7 Standard NAB Vehicle & Equipment Finance	6.7 Standard	$10,000	$150,000	1 to 5 years	$600 initial set up fee		ContinueView details Compare product selection Compare	loading
5.4 Standard BankSA Vehicle and Equipment Finance	5.4 Standard	$15,000	No maximum amount	1 to 7 years	upon application		This loan can be used to hire, lease or purchase vehicles or equipment for your business, with borrowing amounts from $15,000.	ContinueView details Compare product selection Compare	loading
5 Standard ABR Finance	5 Standard	$10,000	$300,000	1 to 3 months	20%		ContinueView details Compare product selection Compare	loading
6.2 Standard Fifo Capital Trade Finance	6.2 Standard	$500,000	$5,000,000	Up to 6 months			ContinueView details Compare product selection Compare	loading
5.4 Standard Fleetcare Business Fleet finance and leasing	5.4 Standard		No maximum amount				ContinueView details Compare product selection Compare	loading
8.8 Great Stratton Finance Business Car Loan	8.8 Great	$5,000	$300,000	1 to 7 years	$482		A business vehicle loan for up to $300,000, with flexible contract terms and fast turnaround times.	ContinueView details Compare product selection Compare	loading
6.1 Standard Fifo Capital Selective Invoice Finance	6.1 Standard	$10,000	$1,000,000				ContinueView details Compare product selection Compare	loading
7.7 Great Westpac Invoice Finance	7.7 Great	$1,000,000	No maximum amount				ContinueView details Compare product selection Compare	loading
6 Standard Octet Trade Finance	6 Standard	$100,000	$12,000,000	1 to 4 months	Transaction fee 2.5%		Access a line of credit to pay suppliers in over 65 countries. Borrow from $100,000 up to $12,000,000.	ContinueView details Compare product selection Compare	loading
5.4 Standard Royal Finance Secured Business Loan	5.4 Standard		No maximum amount		depends on amount borrowed		ContinueView details Compare product selection Compare	loading
Bigstone Asset Finance		$10,000	$2,000,000	1 to 5 years	$250		Borrow up to 100% of the value of your assets with no ongoing fees and the option for low doc finance.	ContinueView details Compare product selection Compare	loading
7.7 Great Earlypay Equipment Finance	7.7 Great	$50,000	$1,500,000	2 to 5 years			Upgrade or expand your business's equipment with equipment finance from Earlypay. Borrow from $50,000 to $1,500,000.	ContinueView details Compare product selection Compare	loading
5.5 Standard Shift Asset Finance	5.5 Standard		No maximum amount	Up to 7 years	$499		ContinueView details Compare product selection Compare	loading
5.4 Standard Bank of Melbourne Vehicle and Equipment Finance	5.4 Standard	$15,000	No maximum amount	1 to 7 years	Upon Application		Borrow from as low as $15,000 for your business' vehicle or equipment requirements. You may choose between owning, hiring and leasing the assets.	ContinueView details Compare product selection Compare	loading
5 Standard Westpac Vehicle and equipment finance	5 Standard	$15,000	$250,000	1 to 7 years	Upon application		Finance your business vehicle or equipment with this loan, tailored to your business needs. Flexible repayment options available and this loan is secured against the asset purchased.	ContinueView details Compare product selection Compare	loading
5.9 Standard ANZ Vehicle and Equipment Finance Most Loved	5.9 Standard	$7,500	$500,000	1 to 7 years	No establishment fee		Borrow from as low as $7,500 to fund your business vehicle and equipment needs. This loan is secured against the asset purchased and approved customers may be eligible to avoid paying a deposit.	ContinueView details Compare product selection Compare	loading
8.9 Great Valiant Finance Vehicle and Equipment Finance Loans	8.9 Great	$5,000	No maximum amount	3 months to 7 years	starting from $399 and can be paid upfront or included in the loan amount		Enquire nowView details Compare product selection Compare	loading

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What are the types of trade finance?

There are several types of trade finance, depending on what you need covered. Some of the options include the following:

• Letters of credit. This is where the financier provides a letter of credit to the seller, assuring them that they will receive the payment for the goods. The buyer, meanwhile, receives assurance that the goods will be made and shipped.
• Export and import finance. With this form of finance, the financer offers a line of credit to exporters and importers. With this line of credit, an exporter can produce or manufacture goods for sale while waiting for their payments from overseas customers to come through. For importers, it allows them to purchase goods while using their outstanding invoices as collateral for finance.
• Payment against documents/documentary trade. With payment against documents, the supplier shows documentation that the shipment is on its way. When the financier receives the documents, they will transfer the payment to the supplier. This gives importers peace of mind that they will receive their goods.
• Payment in advance/cash in advance. This is when the seller receives a payment in advance arranged by the financier to manufacture the goods ordered.

What are the pros and cons of trade finance?

Pros

• Security. Some services allow you to protect your business against unfavourable foreign currency movements.
• Wide range of options. Banks that offer trade finance services have a range of options, some of which you may not have known were available.
• Expertise. You have access to the expertise and advice offered by the bank you're working with. This can help you navigate the complicated landscape of international trade with more ease.

Cons

• Cost. As with other financing solutions, trade finance comes with a cost. Make sure you account for repayments in your budget.
• Limited financing. As with other forms of business finance, trade finance may be limited to the size of your receivables.
• Short terms. Trade finance is designed to cover a single trade cycle, so terms are usually matched to the transaction and capped at around 180 days (about 6 months). You'll need to repay each drawing once your goods are sold or paid for, so it isn't suitable for longer-term funding needs.

How do I compare lenders that offer trade finance?

• Available currencies. Most Australian banks will offer trade in Australian dollars, but keep an eye out for lenders that offer finance in Australian dollars and other foreign currencies.
• Interest rate. Check how often interest is calculated. Ideally, it should be daily. Also compare interest rates and fees between banks.
• Repayments. Take a look at how the repayments are structured and consider whether this will affect your cash flow. Some banks may require you to pay at full maturity. You may want to choose a bank that offers a repayment structure that won't have a negative impact on your business's financials.
• Financing terms. The financing terms for pre- and post-shipment finance will differ between lenders. Pre-shipment finance generally has shorter terms. Check the terms available before you apply to see if they work for your business.

What are the alternatives to trade finance?

While you may be hard-pressed to find corresponding features in other loan products, there are some options that may provide finance. These include the following:

• Business overdrafts. Overdrafts are linked to your transaction account and can be either unsecured or secured for higher amounts. It allows your business to draw beyond what you have in your account, up to the approved limit. You pay interest on what you borrow.
• Line of credit. This is a form of revolving credit, giving you ongoing access to funding up to an approved limit. Both secured and unsecured lines of credit are available. You pay interest on what you borrow.
• Invoice financing. With invoice financing, you can take a loan against your unpaid invoices. You can convert some or all of your unpaid invoices into funds. Most lenders offer up to 80-90% of the total invoice amount, with the balance paid (minus a fee) after the customer has paid.
• Term loans. There are both secured and unsecured term loans you can apply for. Loan terms for these loans are generally longer than other options available, ranging up to 5 years and beyond. The funds are paid in a lump sum.

What should I watch out for?

As with any financing, there are risks involved. You should always read the fine print before applying for any trade finance product. You should also keep an eye out for any restrictions, especially as many of these products will need to be applicable internationally. For instance, some banks will only arrange spot and forward foreign exchange purchases for approved clients. This is something you would need to consider before you apply.

How can I apply for trade finance?

🤔 Work out what type of service you need, how much finance your business requires and what you can afford.

🔎 Start comparing lenders. Apart from the services they offer, don't forget to compare interest rates and fees.

✅ Select a lender. If you're using Finder's comparison table, click "go to site" to be directed to the lender's page or "more info" if you want to read about the lender.

🖨️ Organise and prepare the required documentation.

📱 Apply. Most lenders have their applications online.

Frequently Asked Questions

• Can trade finance be used for domestic transactions within Australia?

  Yes, trade finance can be used to fund the purchase of goods from local Australian suppliers as well as international ones. This is often referred to as domestic supply finance and helps businesses manage the cash flow gap between paying a supplier and receiving payment from a customer without tying up existing working capital.

• Is GST charged on trade finance interest and fees in Australia?

  No, interest charges and most financial supply fees associated with trade finance are generally input-taxed and do not attract GST. However, the underlying goods you are purchasing will likely include GST if bought from an Australian supplier, and you should consult a tax professional regarding any specific service-based fees.

• Do you need to provide residential property as security for a trade finance facility?

  No, many specialised trade finance providers offer unsecured facilities or use the inventory and invoices themselves as the primary security. While traditional banks may still request property as collateral for larger limits, many non-bank lenders in Australia offer flexible options that do not require a mortgage over your home.

• How long does it typically take to get approved for trade finance in Australia?

  Approval for trade finance can occur in as little as 24 to 48 hours when applying through online non-bank lenders. Traditional big four banks typically have a more intensive credit assessment process that can take several weeks depending on the complexity of your business and the documentation provided.

• Can a startup business apply for trade finance with less than two years of trading?

  Yes, some specialised lenders provide trade finance to startups provided they have a confirmed purchase order from a reputable buyer or the directors have significant industry experience. While most traditional banks require at least two years of financial history, the non-bank sector is often more willing to fund specific transactions for newer enterprises.

• What is the main difference between trade finance and a business overdraft?

  Trade finance is a transaction-specific facility linked to the purchase of inventory whereas a business overdraft is a general-purpose line of credit. Trade finance often offers higher limits and repayment terms that are specifically aligned with your shipping and sales cycle rather than just covering daily operational expenses.

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Jeremy Cabral

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Jeremy Cabral is the chief operating officer and global head of publishing for Finder. He has written hundreds of comparisons covering everything from credit cards to travel money to Netflix TV shows. Jeremy has a Bachelor of Business (Marketing) from the University of Western Sydney. See full bio