Trade finance, financial facilities that enable importers to work with their suppliers overseas, have traditionally been utilized by large companies. However, at CBC's North Carolina office, we are seeing an uptick in small and mid – sized businesses (SMEs) utilizing this type of financing to receive longer terms and ultimately more working capital. Here are three examples of why businesses are seeking out CBC's trade finance services, including our Supplier Early Payment (SEP) Program.
1. Growth Spurts – Some companies are seeking out the SEP Program because they are seeing an uptick in demand for their product but need the working capital to be able to produce more. Many of these companies may have a bank line, but do not want to tap into it further. Trade finance will allow them to get longer trade terms so they do not have to pay their supplier as quickly as they may require.
2. Assisting Key Vendors Overseas – A reliable, high-quality manufacturer is critical to many importers' businesses. To increase the manufacturer’s working capital so they can buy the raw materials or parts to manufacture a product, some importers are utilizing the SEP Program to pay their supplier earlier, rather than waiting until the finished product arrives in the U.S. This eases the burden on the manufacturer, freeing up working capital, to ensure that they can produce the product in a timely manner.
3. Strong International Customers – When a U.S.-based importer has strong clients in other countries (Europe, Canada, Asia, etc.), they can use trade finance in lieu of letters of credit. By doing so, they can access capital before their customers pay.
While trade finance has historically been utilized by larger companies, these three examples explain why small and mid – sized businesses are turning to trade finance.