Trade finance explained for importers: paying overseas suppliers before you can sell the stock

Importing rarely fails on margin. It fails on timing. The supplier wants a deposit before production starts, the balance before the container leaves, and freight, duty and GST arrive on top. Your customer, meanwhile, pays thirty or sixty days after they receive the goods. Add sea freight and the whole loop can stretch past four months.

Trade finance is the set of tools that bridges that loop. This guide walks through the timeline first, because it tells you how much you need and when, and then the products that fit each stage.

Where does an importer’s cash actually go?

Draw the shipment as a line from order to cash. A typical container of stock for a retailer or wholesaler looks something like this:

Stage	What you pay or wait for	Rough timing
Purchase order accepted	Deposit to the supplier	Day 0
Production	No payment, but money is already committed	Weeks 1 to 6
Ready to ship	Balance payment to the supplier	Around week 6
At sea	Freight and insurance (depending on terms)	Weeks 6 to 10
Arrival	Duty, GST (unless deferred), port and cartage charges	Week 10
Selling	Stock sits in your warehouse or in transit to customers	Weeks 10 onwards
Paid	Customer pays on trade terms	Often weeks 12 to 18

The funding need is not the invoice value. It is the peak total outlay before the first customer dollar arrives. Many owners size their loan to the supplier invoice, then find the duty, freight and cartage bills were the part that squeezed them.

What are the main trade finance products?

Letter of credit. The buyer’s bank promises to pay the supplier once documents (bill of lading, invoice, packing list, inspection certificate) match the credit’s terms exactly. The supplier gets certainty; you avoid paying before the goods are shipped. The catch is discrepancies: a misspelt consignee or a late shipment date can stall payment and cost fees to amend.

Documentary collection. The banks pass shipping documents between them and release them against payment or acceptance. Fees and paperwork are lighter than a letter of credit, though the supplier has less protection.

Import loan or trade loan. A bank or non-bank funder pays your supplier on your behalf, and you repay in a lump sum after a set period, ideally timed to your customer payments. Some are secured against the goods in transit, others against property or a general security agreement over the business.

Overdraft or line of credit. Flexible, but easy to exhaust on a large shipment and usually reviewed annually. See the business overdraft page for how limits are set.

Stock or asset-backed facility. Funds are advanced against inventory you already hold. This suits an importer who is cash-tight after goods landed but before they sold.

Invoice finance. Once you’ve sold the goods on credit, invoice finance turns the receivable into cash earlier, closing the back half of the loop.

What is deferred GST, and why do importers care?

When goods are imported, GST is normally payable as part of clearing them. For a container of stock, that can be a five-figure sum due well before a single item sells, even though you will claim it back as a credit later.

The ATO’s deferred GST scheme moves that payment into your monthly BAS, where the GST payable and the matching credit appear in the same return. As the ATO describes it, you need an ABN, GST registration, online lodgment with electronic payment, and monthly BAS reporting, and the goods must be for home consumption. If you currently lodge quarterly, you have to switch to monthly first, and the change only applies from the first day of the following quarter. You may be ineligible if returns or payments are overdue.

The practical point: check this before your first big shipment, not after. A change from quarterly to monthly reporting can’t be backdated, and a lender will ask whether import GST is going to land on your account at the border.

Customs duty is different. It generally is still payable on clearance, so keep that in the cash plan.

How do shipping terms change the amount you borrow?

Incoterms are the standard trade terms that say who pays for what and when risk passes. Two importers buying identical goods can need very different funding:

• FOB (free on board): the supplier delivers to the ship; you pay freight, insurance and everything after. More control, more bills.
• CIF (cost, insurance and freight): the supplier books and pays the sea leg and cargo cover up to your port; duty, GST and local charges are yours.
• EXW (ex works): you collect from the supplier’s door. Cheapest on paper, but you carry the whole journey.

When you ask a lender for a facility, state the term. A request based on the product price alone will fall short on FOB or EXW, and the shortfall will be on a deadline.

How do lenders look at an importer?

They read the same things as any business lender, plus a few import-specific questions:

1. The supplier. How long have you bought from them? Is there a history of on-time shipment? A first-time supplier in a new country is riskier.
2. The buyer or the sell-through. Is the stock pre-sold to a retailer or contract customer, or are you buying speculatively? Pre-sold stock is far easier to fund.
3. Margin. Thin margins leave no room for currency movement, delays or a discounted clearance.
4. Currency. Most supplier invoices are in foreign currency. Lenders want to know if you hedge, fix a rate with your bank, or accept the risk.
5. Your track record. Twelve months of bank statements showing consistent turnover often matters more than a polished forecast. See how lenders read your bank statements for the patterns that stand out.

If a bank declined you, that is not unusual. Banks are often the cheapest funding for established importers with a long trading history and security, and it is worth taking a bank offer seriously when you fit the criteria. When the answer is no, usually because trading history is short or the cash cycle is unusual, other lenders look at the shipment and the customer order differently.

What is the difference between funding the deposit and funding the balance?

Splitting the shipment into two funding events often makes the facility cheaper and the approval easier.

• The deposit is the riskiest money: the goods don’t exist yet. Many importers fund this from cash flow or an overdraft.
• The balance is released against a nearly complete order, and a lender can see the goods are about to ship. This is where an import loan or documentary facility fits.

Tell the lender which one you’re asking for. A loan that funds only the balance, repaid from sales, can be much smaller than one covering the whole container.

Unsure what suits your next shipment? Send a short enquiry with the amount, timing and any security on offer.

A worked example (illustrative)

A homewares importer plans a container of ceramics with a supplier invoice of $120k. The supplier asks for 30% up front and the remainder before the container is released. Freight, insurance, duty and port charges add about $22k. The importer has a signed order for part of the stock from a national retailer on 45-day terms.

Item	Amount
Deposit at order (30%)	$36k
Balance before shipping	$84k
Freight, duty and port costs	$22k
Peak outlay before first customer payment	$142k

The importer pays the deposit from cash. An import loan of $84k covers the balance and a short-term facility covers the landing costs. Repayment is timed for roughly 100 days after the loan starts, after the retailer’s first payment. The lesson is that the facility was sized to the peak outlay, not the supplier invoice, and repayment was lined up with when customers actually pay.

Mistakes importers make

• Funding only the product price and forgetting duty, freight and cartage.
• Using a short-term loan for a long cycle. A 90-day facility for stock that sells over six months forces a refinance.
• Ignoring seasonality. Stock landing in January for a Christmas range ties up cash for a year.
• Leaving GST to the last minute. See the deferred GST point above.
• Taking cheap currency risk lightly. A move of a few percent on a large invoice can erase the margin.

For a broader primer on the practicalities, our import finance basics guide covers registrations and costs, and the trade finance loan page lists what lenders typically ask for.

Ready to line up the next shipment?

Importing is a good business when the cash timeline is planned, and a stressful one when it isn’t. If a shipment is on the horizon, tell us the order value, the shipping terms and who is buying.

The form takes roughly a minute and doesn’t involve a credit check at this stage. Nobody forwards your details to a long list of funders. One person reads your situation, then phones you. Be precise about the amount and the timing, because that is what lets us suggest the right fit at the first attempt.

Map out my import funding →