Trade Finance
Category: payment
Financial instruments and products used to facilitate international trade transactions.
Trade finance encompasses financial instruments and products used to facilitate international trade transactions, including letters of credit, trade credit insurance, factoring, and export financing. Trade finance bridges the trust gap between buyers and sellers in different countries and helps manage the cash flow challenges of long supply chains. Services are provided by banks, fintech companies, and specialized trade finance platforms.
Examples
- • Trade credit insurance protects sellers against buyer non-payment; policies typically cover 80-90% of the invoice value.
- • Factoring allows sellers to sell their accounts receivable to a factoring company at a discount (typically 1-5%) for immediate cash.
- • Supply chain financing platforms like Greensill or PrimeRevenue allow buyers to extend payment terms while suppliers get paid early.