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Could your startup benefit from trade finance?

As anyone in the tech industry knows, finance is an all-important issue. If you don’t have it, you often can’t even get your business off the starting blocks. But what is the best form of finance for the tech industry? We’re going to look at trade finance, which could be a good option for tech pioneers of all types.

What is Trade Finance?

Sometimes called purchase finance or purchase order finance, trade financing allows you to trade domestically or internationally with suppliers anywhere in the world, taking care of payments to them and providing you with the capacity to negotiate discounts for early payments. We’ll look at other benefits below, but as you can already see, this is something that could really help to build your business and to improve your offering when it comes to finding ways of collaborating with other businesses.

The benefits of trade finance

The advantages of trade finance are many for tech businesses, which often have to rely on the purchasing of components if they want to succeed. Just some of the benefits to consider are:

  • The opportunity to grow, because you will be able to focus on improving your business rather than worrying about finance.
  • Stronger supplier relationships, because you will be able to pay up front in the currency of their choice.
  • Protection from currency fluctuations, because your financier may even provide a foreign exchange service which can allow exchange rates to be locked in.
  • Reducing risks, because with trade finance in place you will have the confidence of knowing that your supply chain is secure.

How you can apply for trade finance

If you’re interested in arranging trade finance for your tech business, it is always best to do your research. Looking at companies like Touch Financial, it is worth examining whether they have the relevant experience in your industry to help your company grow. Before deciding to extend this form of finance to you, a company will consider aspects such as:

  • Your products, looking at how easy they are to be re-sold on the open market.
  • Your track record, examining the history of your tech company in terms of profitability, order fulfilment and general stability.
  • Your existing credit, because having an item such as a letter of credit can greatly increase confidence in your business.

Make the most of your opportunities

Trade finance can be a useful external source of working capital for your startup as it is relatively easy to obtain and can be secured against goods or backed by an insurance policy. However, just like most other forms of financing, it is usually based on your business having a good track record, and founders should note that it can become expensive if payments are not made on time.

Photograph by Unsplash

Zak Goldberg is a Law & Business Graduate from the University of Leeds who has chosen to follow his aspirations of becoming a full-time published writer, offering his expertise on all areas of law, business and finance.