Quick answer
Trade finance pays your suppliers, here or overseas, so you can buy stock or materials before your own customers pay you. The financier settles the supplier invoice, often in foreign currency, and you repay it over an agreed period, commonly 60 to 180 days, once the goods have been sold. It covers supplier payment facilities, letters of credit, documentary collections and guarantees, and suits importers, wholesalers and manufacturers.
Key points
- Pays suppliers up front so you can repay once the goods have been sold
- Includes supplier payment facilities, letters of credit, documentary collections and bank guarantees
- Each drawing is tied to a specific purchase and repaid at the end of its term
- Lenders look at your trading history, margins and how quickly stock turns
- Supplier early-payment discounts can offset part of the cost
- Typical term per drawing
- 60 to 180 days
- Pays
- Domestic or overseas suppliers
- Security
- Usually a general security agreement over the business
- Suits
- Importers, wholesalers, manufacturers, retailers
Most finance looks backwards. A bank wants your last two years of tax returns; an invoice financier wants invoices you’ve already issued. Trade finance is one of the few products that looks forward, at a purchase you haven’t made yet and a sale that hasn’t happened. That’s why it’s so useful to a business whose cash is always tied up in stock somewhere between a factory and a customer.
Where does the cash gap come from?
Picture a homewares wholesaler buying from a manufacturer overseas. The cycle might run like this:
| Day | What happens | Cash position |
|---|---|---|
| 0 | Order placed, deposit paid to supplier | Cash out |
| 30 | Goods ready, balance paid before shipping | Cash out |
| 60 | Goods arrive, freight, duty and GST paid | Cash out |
| 75 | Stock delivered to retailers on 30-day terms | No cash yet |
| 110 to 125 | Retailers pay | Cash finally in |
That’s roughly four months between first paying and finally getting paid. Multiply it across several orders running at once and a business with healthy margins can still run out of cash. Trade finance pays the supplier on day 0 and day 30, and the wholesaler repays from retailer receipts around day 120.
Our cash flow gap calculator helps you measure your own version of this cycle before you approach anyone.
What products count as trade finance?
“Trade finance” is an umbrella. The main tools Australian businesses use:
| Product | How it works | Best when |
|---|---|---|
| Supplier payment facility | The financier pays supplier invoices directly; you repay each drawing within an agreed term | You have regular suppliers and want flexibility |
| Letter of credit | Your supplier is paid by a bank on presenting the shipping documents both sides agreed | A new or distant supplier wants payment certainty |
| Documentary collection | Shipping papers are released through the banks only against payment or a signed promise, with no bank guarantee | You and your supplier trust each other but want a formal process |
| Bank guarantee or standby credit | A bank backs your promise to pay | A supplier wants security before giving credit terms |
| Purchase order funding | Funding against a confirmed customer order | You’ve won an order bigger than your cash can handle |
Supplier payment facilities are the most common with non-bank lenders. Letters of credit and documentary collections remain mostly the territory of banks.
Why Incoterms decide when your funding clock starts
Incoterms are the international shipping terms published by the International Chamber of Commerce that set out when risk and costs pass from seller to buyer. They change your finance needs more than many owners realise.
- Under EXW (ex works), you take on risk at the supplier’s door, so you’ll fund freight, insurance and export clearance as well as the goods.
- Under FOB (free on board), risk passes when goods are loaded onto the ship, and you organise and pay for the sea freight.
- Under CIF (cost, insurance and freight), your supplier covers shipping and cover to the destination port, so the supplier’s price is higher but your separate outlays are lower.
The point for finance: a trade financier funds the purchase price, and sometimes freight and duty, but not every lender covers every cost. Before asking for a limit, list each payment in the cycle and confirm which ones the facility will cover. If the facility covers only the supplier invoice, you’ll still need cash for freight, customs and GST. The import finance page goes deeper on that landed cost stack.
What do trade financiers check?
| What they assess | What they want to see |
|---|---|
| Trading history | Usually at least a year or two of buying and selling the same kinds of goods |
| Gross margin | Enough margin to absorb the finance cost and a bit of slippage |
| Stock turnover | How fast goods sell; slow-moving stock means longer terms and higher risk |
| Supplier relationships | Repeat suppliers with a track record of delivering on spec |
| Customer base | Who buys the goods and how quickly they pay |
| Financial reporting | Recent financials, management accounts and BAS |
| Existing security | Any general security agreement a current lender holds |
Entry criteria vary sharply between providers. According to their profiles in our directory as at October 2026, Octet asks for at least $3m annual turnover for trade finance, Fifo Capital lists trade finance limits from $500k to $5m, and Moneytech lists trade finance up to $10m. Banks also offer trade finance, and if your bank will extend a facility on terms that fit, it’s well worth comparing.
Have a large order to fund this season? Start your enquiry here. It’s quick and doesn’t trigger a credit check.
How much does trade finance cost?
We don’t publish rates; what you’ll pay depends on the provider, your risk profile and the term. Expect a combination of:
- Facility or establishment fees when the line is set up.
- A charge on each drawing, calculated for the days the money is out.
- Transaction fees per supplier payment, plus foreign exchange margins on overseas payments.
- Bank fees for issuing or amending a letter of credit, if you use one.
Two habits make trade finance cheaper in practice. First, choose a term that matches how long the stock actually takes to sell; paying for 180 days when stock turns in 90 is waste. Second, ask suppliers whether they’ll give a discount for prompt payment. If a supplier gives a few per cent off for paying on order instead of on 60-day terms, that saving can offset a meaningful share of the finance cost.
On currency: many facilities pay overseas suppliers in the supplier’s own currency. The exchange rate you get on the day, and any margin the provider builds in, can move your cost as much as the finance charge does. The Reserve Bank publishes daily reference rates you can use to sanity-check a quote.
Pros and cons
Pros: frees up cash to buy more stock, lets you negotiate as a cash buyer, flexible drawings for each purchase, and limits that can grow as your buying grows.
Cons: needs a trading history, adds a currency layer to manage, short repayment dates arrive whether or not stock has sold, and fees per transaction add up across many small orders.
Alternatives to trade finance
- Supply chain finance, if a large customer offers its suppliers early payment. See supply chain finance vs trade finance.
- Debtor finance, to unlock cash after the goods are sold on credit terms. Many businesses run both.
- A business line of credit to cover small or occasional buys.
- Funding against property through a secured business loan when you need a bigger buffer or don’t yet have the trading history.
For background reading, our guide to trade finance for importers and our page on funding for paying suppliers are good next steps.
Buy the stock now, let the sale pay for it
Trade finance works best when a business has proven products and suppliers and simply needs its cash to go further. The right facility depends on where you buy, how fast you sell and how much of the landed cost you need covered.
If that describes you, tell us about your buying cycle. Our form needs about sixty seconds, and making an enquiry places no credit check on your file. Your information isn’t sprayed out to every financier in the country: a single specialist works through your order pattern and rings you. Exact numbers for turnover, usual order size and supplier terms help us propose the right structure straight up.
Frequently asked questions
What is trade finance in simple terms?
It's a short-term facility that pays your supplier on your behalf so you can receive and sell the goods before repaying. Instead of tying up your own cash for months while stock is shipped, warehoused and sold, a financier carries that gap for an agreed fee.
Is trade finance only for importers?
No. Importers are the biggest users, but many facilities also pay Australian suppliers. Exporters use related products, such as pre-shipment finance, export credit and bonds, which we cover on our export finance page.
How long can I take to repay trade finance?
Each drawing usually has its own term, commonly 60, 90, 120 or 180 days, chosen to match how long it takes to receive and sell the goods. Some providers let you repay early and save on charges.
Do I need property security for trade finance?
Not always. Many trade financiers rely on a general security agreement over the business and director guarantees, with the stock and resulting invoices underpinning the facility. Larger limits or newer businesses may need extra security.
What's the difference between trade finance and supply chain finance?
Trade finance is arranged by the buyer to pay its suppliers. Supply chain finance is usually set up by a large buyer so its suppliers can be paid early at the buyer's credit standing. Our comparison page covers this in detail.
Can a newer business get trade finance?
It's harder. Most providers want to see a trading history with repeat suppliers and healthy margins. Newer businesses sometimes start with a smaller limit, a letter of credit or funding against confirmed customer orders.