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Singapore SME Funding Support

Trade Financing

Type of Trade Financing Available

Trade Financing Benefits

Reduce the risk associated with global trade

Trade finance can help reduce the risk associated with global trade by reconciling the divergent needs of an exporter and importer. Ideally, an exporter would prefer the importer to pay upfront for an export shipment to avoid the risk that, the importer takes the shipment but refuses to pay for the goods. However, if the importer pays the exporter upfront, the exporter may accept the payment but refuse to ship the goods.

A common solution to this problem is for the importer’s bank to provide a letter of credit to the exporter’s bank that provides for payment once the exporter presents documents that prove the shipment occurred, like a bill of lading. The letter of credit guarantees that once the issuing bank receives proof that the exporter shipped the goods and the terms of the agreement have been met, it will issue the payment to the exporter.

With the letter of credit, the buyer’s bank will take on the responsibility of paying the seller. The buyer’s bank would have to ensure the buyer was financially viable enough to honor the transaction. Trade finance helps both importers and exporters build trust in dealing with each other and thus facilitating trade. Trade finance allows both importers and exporters to access to many financial solutions that can be tailored to their situation, and sometimes, multiple products can be used to help ensure the transaction goes through smoothly.

Improves Cash Flow and Efficiency of Operations

Besides reducing the risk of non-payment and non-receipt of goods, trade finance has become an important tool for companies to improve their efficiency and boost revenue.

It is an extension of credit in many cases. Trade finance allows companies to receive a cash payment based on accounts receivables in case of factoring. A letter of credit might help the importer and exporter to enter a trade transaction and reduce the risk of non-payment or non receipt of goods. As a result, cash flow will be improved since the buyer’s bank guarantees payment, and the importer knows the goods will be shipped.

In other words, trade finance ensures fewer delays in payments and allows both importers and exporters to run their businesses and plan their cash flow more efficiently.

Increased Revenue and Earnings

Trade finance allows companies to increase their business and revenue through trade. For example, a company that can clinch a sale for a large order, might not have the ability to produce the goods needed for the order.

However, through the help of trade financing from the banks, the exporter can complete the order by having the financial means to pay their suppliers.

As a result, the company gets new business that it might not have had, with the support that trade finance provides.

Reduce the Risk of Financial Hardship

Without trade financing, a company might fall behind on payments and lose a key customer or supplier that could have long-term impact for the company. Having options like revolving credit facilities, business loan and accounts receivables factoring can help companies on their cashflow and tie them through in times of financial difficulties.

Example of Trade Facilities under EFS/Govt Support

Business Loan Specialists in Singapore

Government Supported

Enterprises can secure short-term trade financing loans via the Loan Insurance Scheme (LIS) from Participating Financial Institutions (PFI)

Loans are insured by commercial insurers which co-share loan default with the PFI in the event of enterprise insolvency. A portion of the insurance premium is supported by the Government.

As announced at Supplementary Budget 2020, support for the LIS insurance premium will be increased to 80% (from 50%) until 31 March 2021.

Enterprises can apply for the LIS to secure short-term trade financing for the purpose of:

  • Inventory/ stock financing facility
  • Structured pre-delivery working capital
  • Factoring/ bill or invoice or accounts receivable discounting with recourse
  • Overseas Working Capital Loan
  • Banker’s Guarantee

Eligibility

Companies applying for the LIS should meet the following criteria:

  1. Be a business entity that is registered and physically present in Singapore, and
  2. At least 30% local equity held directly or indirectly by Singaporean(s) and/or Singapore PR(s), determined by the ultimate individual ownership, and
  3. Group revenue of up to S$100 million or maximum employment of 200 employees.

Why get your Trade Financing through Beez Rev?

A team that will support you

We have a dedicated team that will walk you through your entire loan process and help you do the market research you need.

We let lenders compete for your loan

Be ready to be spoilt for choice when we help you compare the best deals across all banks and non-banks so you only get the lowest interest rate and the highest cash out amount. Our rates are same as what the banks can offer or even better.

Frequently asked questions

What do I need to prepare to apply for an invoice financing credit line?
Apart from the standard business documents like your bank statements, financials, guarantor’s NOA and CBS report. The more important documents are:
  • Receivables ageing list
  • List of buyers and the forecast purchase amount
  • Contracts or agreement with your buyer
  • Sample invoices
Most of the time, it can take up to 1 month to get a credit line approved. This is typically due to the fact that they need to get you set up on a system as well so that you can be familiar with the operational process with the financier.
You can finance your invoices as many times as you want as long as it is within the credit limit that is approved and you have the buyer approved. You do need to note that most financiers have a minimum amount for each invoice and there is a minimum fee per invoice. Hence, it is important to weight the cost when financing smaller invoices.
Invoice financing services are divided into two categories: recourse and non-recourse. Non-recourse financing has higher costs, but the financier will bear the risk if the consumer does not pay. Recourse financing is less expensive, but you must purchase back invoices if they go unpaid for a certain number of days as specified in the financing agreement.
Invoice financing allows businesses to get paid up to 90% of their invoice amount early, allowing them to bridge or improve cash flow that would otherwise be locked in unpaid bills due to payment conditions or delayed payments. It is a cost-effective, cash-flow-friendly alternative for SMEs who require a short-term capital infusion.
Most financiers can offer a credit limit of up to S$10 million depending on the credit quality of your end buyer.
There is a one time disbursement fee on each invoice and an interest fee that is charged pro-rated to the tenor of the financing.