International Business Experts, Greg Smith and Barry Rogers from ABL Advisory discuss trade finance in the current environment. To listen to it, click on the link below.
Barry has spent more than 35 years in Trade Finance, Invoice Finance, Supply Chain Finance, FinTech’s, Invoice Trading Platforms and other working capital solutions. Having worked in many countries, he brings in-depth “hands-on” experience in advising lenders and investors in the asset class of Trade Receivables which, together with his team, provides a “one-stop” place for Advisory in this sector. Barry is a professionally qualified Credit & Risk Manager and Asset Based Lender.
Many different financial mechanisms and instruments are used in Trade Finance, is an umbrella term for many different ways to finance international trade. Trade finance is therefore aimed at Exporters (Sellers) and Importers (Buyers) to facilitate cross-border trade in a safe way to ensure the exporter gets paid and the importer receives the goods he wants in a timely way.
A letter of credit is a financial document issued by Banks to provide to the Sellers (Exporters) Bank for payment of goods and services purchased by Importer (Buyer). Letters of Credit are usually only used in Cross-Border Trade. It guarantees payment to the Exporter. It is a real exposure for the Bank who has to pay and is governed by UCP 600 Rules.
Supply chain finance (SCF) is a term usually used to describe Buyer lead financing programs for bigger companies. They invite suppliers to be part of the program enabling the supplier to upload invoices and delivery documents, enable the buyer to approve them and the main benefit it provides the supplier access to early payment of his invoice at a discount. Some practitioners call this dynamic discounting and/or Reverse Factoring. It’s a growing product/service. You will find many of today’s large supermarkets have SCF schemes. The finance is usually provided by a partner bank/s and other funders.
Invoice financing platforms allow for faster and more efficient financing as compared to banks. Through invoice financing, SMEs are now able to easily obtain cash from their own invoices without the risks of increasing debts. This is definitely a better solution to support SMEs with their financial growth and provide better alternatives to working capital financing. Businesses are able to obtain working capital through selling off an outstanding invoices or accounts receivable as well on these invoice financing platforms.
Invoice financing platforms allow for faster and more efficient financing as compared to banks. Through invoice financing, SMEs are now able to easily obtain cash from their own invoices without the risks of increasing debts. This is definitely a better solution to support SMEs with their financial growth and provide better alternatives to working capital financing. Businesses are able to obtain working capital through selling off an outstanding invoices or accounts receivable as well on these invoice financing platforms.
As the reliance on trade credit insurance increases during the Covid-19 pandemic, the new challenges in the trade credit insurance market are obvious.
Despite positive news on the vaccine front, the Covid-19 pandemic continues to wreak havoc on businesses and their supply chains and economic forecasts remain gloomy for 2021. At the same time, the reliance on trade credit insurance is increasing, and yet capacity is tightening and the availability of cover for certain market participants is challenged. The volume of global trade underwritten by credit insurers is estimated to be in excess of $3 trillion, according to the International Credit Insurance and Surety Association, and they play a key role in keeping global supply chains moving.
However, the insurance market was in “total chaos” last year in 2020 as a contraction and hardening of terms that was already taking hold has been accelerated by the spread of the virus. A year later we are seeing some improvements, but it remains a very difficult market for credit insurance remembering many of the insurance companies were grateful for the assistance afforded by Sovereign Governments during the height of the pandemic and after.
Our businesses have senior advisors with a cumulative 150 years’ experience in Commercial Finance and Trade Finance. We work all around the world. We have set up 28 Invoice and Trade Finance companies from start to finish (Turnkey Solutions).
Our Growth-Finance business, an intermediary, can arrange finance for your domestic business (in any country) and also your export and import trades.
ABL Advisory, advises investors, banks, Invoice & Trade Finance companies, Finance Institutions and Trading companies on the dynamics of Invoice & Trade Finance, SCF and investing in Trade Receivables as an asset class. We sit on Credit Committees and Supervisory Boards and provide advisory when needed.
Barry Rogers is CEO/Founder of both ABLAdvisory.co.uk and Growth-Finance.com. He can be reached on +44 800 612 7049 or at Barry.Rogers@ABLAdvisory.co.uk.
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