Trade finance includes all the products and monetary contracts of a company that allows and facilitates its international trade transactions. Trade finance makes it safer for both importers and exporters to make international transactions by securing the payment from the buyer as well as the delivery from the seller by introducing a third party to the transactions. This third party is in charge of issuing letters and lines of credits, working capital, accounts receivable factoring, and even insurance policies, thus protecting sellers and buyers from potential breaches or irregularities.

Why is Trade Finance so important?

Trade finance guarantees international transactions are completed satisfactorily.

By introducing a third party to the contract, which usually includes banks, insurance companies, and other export credit agencies, the risk that any of the parties won’t fulfill its obligations is reduced greatly due to the existence of a clear and impartial intermediary.

Trade finance also includes loans which can be issued to both importers and exporters to finance the transactions as well as letters of credit, which guarantees the buyer will pay for the goods shipped. Similarly, insurance companies can take part of the trade finance by protecting not only the payment but also the goods sold.

Additionally, trade finance includes tools that not only reduce the payment-delivery risks but also improve businesses’ overall supply chain by making the purchasing and shipping process easier for both parties. Businesses can also see an increase in cash flow if they choose to use options such as lines of credit to finance their supply chain or even account receivables factoring to get cash in advance before the buyer pays off the invoices.

Where does Velotrade fit in the Trade Finance supply chain?

Velotrade is the alternative to bank financing. We have helped thousands of businesses (SME’s) financing their working capital needs in less than three days. Velotrade is also the only trade finance fintech company to be approved by Hong Kong’s regulated agency, the Securities and Futures Commission.