Facilities drawn per transaction to pay suppliers up front, cover goods in transit and fund stock until it sells. The lender looks at the trade cycle, the supplier and the end buyer, not only at your accounts.
Typically 60 to 180 days per transaction · supplier payment, letters of credit, stock finance
Typical situations
A confirmed order from a customer you have supplied for years, at a volume that needs the supplier paid before a penny arrives from the buyer. Between the deposit, the shipping and the customer’s 60 day terms, the cash is out of the business for four months. A transactional facility covers that window and is repaid from the sale it funded, rather than sitting on the balance sheet as term debt.
A new overseas supplier with no trading history with you, insisting on payment before shipment. A letter of credit gives them the certainty they want without you releasing cash against goods you have not seen.
Goods landed and warehoused ahead of a selling period. Stock finance funds the holding cost until the stock converts, and often runs alongside an invoice facility on the sales that follow.
A trade facility is underwritten transaction by transaction. The lender maps the cycle: deposit paid, goods manufactured, shipped, landed, delivered, invoiced, paid. Each step has a duration and a document behind it, and the facility is sized to the length of that cycle rather than to an annual turnover figure. A 45 day manufacturing lead time followed by 30 days at sea and 60 day customer terms is a 135 day facility, and it needs to be priced as one.
Three parties are assessed, not one. Your supplier, because a failure to ship is the lender’s risk as much as yours. Your end buyer, because they are the source of repayment. And you, in the middle, on whether you can manage the logistics, the paperwork and the currency. A strong buyer and a proven supplier can carry a case that your accounts alone would not.
Facilities usually combine. A supplier payment facility or letter of credit covers the front of the cycle, stock finance covers the middle, and an invoice facility funds the back once the goods are delivered and invoiced. Arranging them together, rather than one at a time as each gap appears, is what keeps the total cost proportionate to the margin on the trade.
Indicative market ranges, not an offer of finance. Terms depend on the lender, the security and your circumstances.
What the lender assesses
What goes in the pack
A first transaction with an unknown supplier is the hardest to fund. We structure it so the lender’s exposure is tied to documents and shipment rather than to trust, and keep the first facility small enough to build a record on.
Who owns the goods, and at which point, decides where the lender’s security sits. The incoterms are confirmed at the outset instead of being inferred from the invoice.
A transaction with a 6% margin and a 140 day cycle rarely survives contact with the cost of funding it. We run the calculation before the facility is arranged and say plainly when a trade does not pay for itself.
Under a letter of credit a discrepancy in the paperwork stops payment, however sound the underlying trade. The document list is agreed with the supplier before shipment rather than chased afterwards.
An undertaking from a bank to pay your supplier once they present documents proving they shipped what was agreed. It gives an overseas supplier certainty without you releasing cash against goods you have not seen. The detail matters: payment depends on the documents matching exactly, so the terms are worth agreeing before shipment.
It helps, but it is not the whole case. Lenders weigh the supplier and the end buyer heavily, so a first-time importer with a proven supplier and a creditworthy buyer can be funded where the accounts alone would not carry it. Expect a smaller first facility that grows with the record.
They cover different halves of the same cycle. Trade finance pays the supplier and funds the goods until they are delivered; invoice finance funds the receivable once you have invoiced the customer. Run together, the facility covers the whole period between paying out and being paid.
Yes. Facilities are available in sterling and the major trading currencies. Where the purchase is in one currency and the sale in another, the exchange exposure is a separate risk from the funding, and forward cover is arranged alongside rather than assumed away.
That is the risk a lender spends most time on, and it is why resaleable goods and a creditworthy buyer matter so much. Credit insurance on the receivable can transfer part of it. On specialised goods made to one customer’s specification, expect a lender to want more contribution from you.
Funds the second half of the same cycle, once the goods are delivered and invoiced.
Where the need is ongoing working capital rather than funding tied to specific transactions.
We will map the cycle, work out how long the facility actually needs to run, and come back with the structure and the lenders that fund that trade.
