At a recent conference held by ESRI and the Department of Finance on 26th September 2014, it was highlighted that Irish SMEs are reliant on banks as their main source of external finance. This makes SMEs vulnerable to credit restrictions and hinders their growth. So what other alternatives are out there for SMEs? This blog post reviews trade finance and its suitability for fuelling SMEs.

What is trade finance?

Trade finance basically provides the company with the money to pay suppliers and purchase goods. In this way, the SME has access to more turnover financial resources and growth in the business. Finance is provided on a trade basis, not on open account as provided by many banks.

What are the advantages of trade finance over bank loans and equity?

There are two main advantages of trade finance over other forms of SME financing. Firstly, it is easily accessible because the approval process is a lot shorter than the banks. Secondly, the interest rates are low and repayments flexible. Finance is in the form of debt, therefore SME’s do not have to forgo expensive equity in order to grow. Trade finance does not cover all business types as there are restrictions to the types of goods it can be used to purchase.

What type of businesses does trade finance cater for?

Trade finance may exclude some businesses, such as perishable goods, fashion items and services. Therefore, it is only if your business trades in non-perishable goods that trade finance will be an option.

Where and how do I get trade finance?

There are a number of trade finance companies in Ireland, but your best option will be to speak to a financial advisor before making a decision. The financial advisor will be able to evaluate your situation and determine what type and amount of trade finance will be best fit for your operation.

For more information go to:  

www.cashflowplus.ie

Many thanks to IPS Financial Advice - Head office for providing us with tis useful link for SME's and Family businesses