Trade finance basics: funding your international deals

Trade finance bridges the gap between when a seller ships goods and when a buyer pays. It reduces risk and frees up working capital for both parties.

Common Instruments

• Pre-export finance — A loan to the exporter secured against a confirmed order or LC, used to purchase raw materials and fund production.
• Post-shipment finance — The exporter receives funds from the bank after shipping, while the bank waits for the buyer to pay under the LC or collection terms.
• Factoring — The exporter sells its receivable (invoice) to a factor at a discount in exchange for immediate cash.
• Forfaiting — Similar to factoring but for medium- to long-term receivables, typically backed by a bank guarantee or aval.
• Supply chain finance — The buyer's bank pays the supplier early at a discount, leveraging the buyer's stronger credit rating.

Choosing the Right Option

For first-time exporters, pre-export finance backed by an LC is often the most accessible option. As your trade volume grows, consider factoring or supply chain finance programs.

On Faktorist

Faktorist partners with trade finance providers. Eligible deals can apply for financing directly from the deal detail page. The platform shares verified transaction data with the lender to speed up approval.