The Funding of Purchases

Shipping Goods

Trade or Transaction Finance is "through finance" from supplier through the client to customers who require goods or services. It is "off-balance-sheet" finance, which does not affect existing bank facilities. The normal simple scenario is that we buy and sell to the client. Upon sale of the product the sales invoice is assigned to us and, from proceeds, we recover our position and pay the profit to the client.

Our prime consideration is always to know how we are going to get our money back. When we know that, we can buy goods or services for the client that they cannot finance for themselves. Other than that we have few rules.


Finance Categories

Such finance is used for imports, exports, goods both bought and sold in UK (frequently after manufacture), and even if the goods never touch the UK or Ireland. Example Icon Examples >>.

A substantial client category is businesses that cannot get sufficient credit themselves from their UK suppliers. Some are new businesses but most are restarts, recent starts, CVAs or "rebuilds". We frequently get our money back from the client's factoring company. However, not all factoring companies (including the UK bank owned factors) make it practical to work with them. Example Icon Examples >>.

Goods do not always have to be pre-sold. Example Icon Examples >>.

We often buy for a manufacturer or assembly operation. Example Icon Examples >>.

Trade finance can be used where our client both supplies and fits, even if the sales contract is "contractual". Example Icon Examples >>.

Because of our credibility and substantial covenant our most frequent method of purchase is on "open account" using a Supplier Undertaking (SU), either from UK or overseas. This is much more economical for the client than the use of LCs, but it is also much more secure for all parties, including even the supplier. Example Icon Examples >>.

If the SU cannot be used, we import using "DP", "DA", or a letter of credit, each case being separately determined. Example Icon Examples >>.

For clients who sell on credit we have several formats for recovering our funds from their factoring company. Example Icon Examples >>.

Recent Examples & Articles

Click the Examples links on the left to view recent examples of that type of finance and read available case study articles that have previously been published in Business Money.

  • Buy lobsters from Russian fisherman, processed in Peru and sold to customer in Canada.
  • Issued Standby Letter-of-Credit as a performance bond to secure a transaction of a shipload of crude oil between two African countries.
  • Client in UK. Put a large transaction together with both supplier and customer in USA.
  • Services as well as goods. Pay the costs of boat charter in Poland; funds recovered from assignment of proceeds from cargo. Similar for freight aircraft charter, and for international telephone calls.
  • Medical equipment imported USA, sold to NHS Trusts. Purchased economically using a Supplier Undertaking (SU) in which the supplier sells to us on open account.
  • Client factors his debts also needs purchase finance but the factor does not offer it. If the transaction would qualify for trade finance with us, we can work with the factor. Every factoring company can offer our trade finance to their clients. Clients thus far in bedding, baths, bags, car lighting, clothing, frozen and fresh food, gift products, furniture, luggage, point of sale materials, shoes, sunglasses, watches.