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4 trade finance solutions that can help you prepare for Brexit

14/03/2019

With no withdrawal agreement settled, many businesses are currently asking themselves the same question. How will Brexit affect our trade with the EU?

One major change that is becoming a much more tangible possibility is that anyone importing or exporting goods across the border of the EU could be forced to fill out custom declarations, slowing the movement of goods.

And surveys are showing that European businesses could plan to push UK suppliers for discounts, delay payment or even stop using them altogether. In fact, 20% of EU companies stated in a survey by the Chartered Institute of Procurement & Supply that they would ask for discounts on their orders if they were delayed, and a quarter have said they would postpone payments until after the goods had arrived.

This could create cash flow problems for thousands of companies, and those with low cash balances will be hit the hardest. If you feel that your business could be at risk, we’ve highlighted some of the trade finance solutions that could help in these situations.

Export Finance

Export financing can help you to maintain a good cash flow when goods you’re sending to customers are tied up with longer shipment times.

There are different forms of export financing; pre-shipment, which allows you to fund against the order value to cover shipping costs, and post-shipment, which helps to bridge the gap between shipping the goods and awaiting payment from the customer.

While funding can be advanced in the favoured currency, helping to mitigate fluctuations in exchange rates, credit protection can also be incorporated into the facility to safeguard the business against the risk of bad debt.

Letter of Credit

Letters of credit offer a guarantee when trading internationally that you won’t be left out of pocket, whether you are importing or exporting goods.

When exporting, they provide assurance that you will be paid if your customer is unable to settle the debt. When importing, they mean that you do not have to pay for the goods you have ordered before they arrive.

Invoice Finance

With invoice financing, you can release up to 90% of an invoice value within 24 hours of its issue, meaning that you are not left with cash flow problems because of the credit terms afforded to your customer.

Specifically, export factoring facilities are made for exporters and can additionally incorporate a dedicated sales ledger management function, which can be so important when trading with overseas customers with language and cultural differences.

Read more about export factoring here.

Import Finance

If your business primarily imports goods from overseas, for instance raw materials or parts to fulfil domestic orders, import finance can bring numerous benefits here too.

Import financing can help you to bridge the gap between receiving an order, placed on credit terms and from a sufficiently credit-rated customer, and payment being demanded from overseas suppliers.

If you regularly import goods from the EU and you feel that your cash flow could be affected by the delays, this could be a good solution for you, as it will prevent you from having all your cash tied up in the shipment.

If you want more information on how trade financing can help you protect your business, we can help you discuss your options as an independent commercial finance broker. Contact us today on 0800 9774833 or request a call back at a convenient time to see how we could help your business.

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Some of the funders we work with

  • Metro Bank SME Finance
  • Partnership Invoice Finance
  • Lloyds Bank Commercial Finance
  • 4Syte
  • Secure Trust Bank
  • Woodsford Tradebridge
  • Innovation Finance
  • Santander Corporate & Commercial
  • Catalyst Finance
  • Royal Bank of Scotland
  • Bibby Financial Services
  • Close Brothers Invoice Finance
  • InvoCap
  • Regency Factors
  • ABN AMRO Commercial Finance
  • GapCap Cashflow Finance
  • Giant
  • Calverton Finance
  • Davenham Trade Finance
  • Spotcap
  • Barclays
  • Shawbrook Business Credit
  • Aldermore Invoice Finance
  • Berkeley Trade Finance Ltd
  • Haydock Finance Ltd
  • inFund
  • Positive Cashflow Finance
  • Boost Capital
  • Asset Advantage
  • iwoca
  • Gener8 Finance
  • Trade Finance Partners
  • MarketFinance
  • PNC Business Credit
  • Merchant Money
  • Ultimate Finance Group
  • Pulse Cashflow Finance
  • Creative Capital
  • Leumi ABL
  • Peak Cashflow
  • Nucleus Commercial Finance
  • IGF Invoice Finance
  • Team Factors
  • 1pm
  • Skipton Business Finance
  • Roma Finance
  • Davenham Asset Finance
  • Investec

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