Quick answer
Trade finance is short-term funding that pays your suppliers — often overseas manufacturers — for goods before you've sold them. The financier pays the supplier, and you repay over a set period, typically once the stock arrives and starts selling. It suits importers, wholesalers and retailers who must pay deposits or full amounts up front while their own customers pay later.
Key points
- Pays suppliers so goods can be shipped and landed.
- Repaid over a set period, usually as the stock sells.
- Each transaction is matched to a purchase order or supplier invoice.
- Landed cost includes freight, duty, GST and clearance — budget for all of it.
If you import, you know the rhythm: pay a deposit when you order, pay the balance before the goods ship, wait weeks for them to cross the ocean, clear customs, pay freight and duty — and only then start selling. That’s a long time for cash to be at sea. Trade finance moves the waiting from your bank account to the financier’s.
What is trade finance?
It’s a short-term facility that pays your suppliers for goods so your business doesn’t have to fund the whole cycle from its own cash. Each purchase is a separate drawing tied to a supplier invoice or purchase order. You repay each drawing after a set period — designed to give the goods time to arrive and sell.
business.gov.au’s importing guidance lists the costs that pile on top of the supplier price: freight, insurance, duty, GST and clearance fees. Good trade finance planning covers all of them, not just the factory invoice.
Who uses trade finance?
- Importers and wholesalers bringing in containers of stock from overseas manufacturers.
- Retailers and online stores buying ahead of peak season — see retail and e-commerce.
- Manufacturers paying for raw materials or components before production.
- Businesses offered better supplier pricing in exchange for paying up front or in larger volumes.
How does trade finance work, step by step?
- Enquire with your typical order sizes, suppliers, lead times and how quickly stock sells. No credit check to enquire.
- Facility assessment. The financier reviews your trading history, supplier relationships and how you sell the goods.
- Limit approved. An overall limit is set, with a term for each drawing.
- Order goods. You raise a purchase order; the supplier issues an invoice.
- Supplier paid. The financier pays the supplier directly, in the supplier’s currency if required.
- Goods land and sell. You repay the drawing at the end of its term or progressively as stock sells.
What are the pros and cons?
| Pros | Cons |
|---|---|
| Keeps cash free while goods are in transit | Needs documented suppliers and purchase orders |
| Can help negotiate better supplier terms | Best suited to regular, repeat importers |
| Matches each drawing to a specific shipment | Unsold stock still has to be repaid |
| Often no property security for established traders | Currency movements can change the true cost |
| Scales with order volumes | Shipping delays can squeeze the repayment window |
What does it look like in practice? (illustrative)
A Hobart outdoor-gear importer orders a container of tents and camping furniture each August for the summer season. The factory wants 30% on order and the balance before shipping. The goods land in October and sell hardest from November to January.
Using trade finance, the financier pays both supplier instalments. The importer pays freight and duty from cash flow, sells through the summer and repays the drawing in February. Without the facility, the business would have tied up its cash for five months before earning a cent from the order. Illustrative only.
What are the hidden costs of importing to budget for?
- Landed cost. Supplier price plus freight, insurance, duty, GST on importation, customs broker and port fees.
- Currency. If you pay in a foreign currency, exchange movements between order and payment change the real price.
- Time. Shipping delays stretch the period you’re funding.
- Storage. Stock that arrives early needs space and possibly insurance.
The ATO’s trading stock rules also affect how stock is valued at year end — worth a chat with your accountant for big seasonal orders. If the numbers are making your head spin, let us help you size the facility.
How does trade finance compare with paying from cash?
Paying suppliers from your own cash is simplest and costs nothing in fees — if you can afford to have that money tied up for months. The real question is opportunity cost. Cash locked in a container can’t pay for marketing, a second order, a new hire or an emergency. Trade finance costs money, but it can let you place bigger or more frequent orders, take supplier discounts for paying up front and keep a buffer in the bank. Compare the facility’s total cost in dollars with the extra margin and sales it makes possible, and the answer is usually clear one way or the other.
Many importers land somewhere in the middle: they fund routine orders from cash flow and use trade finance for the big seasonal container or the new product range that would otherwise stretch them too thin.
What documents will you need?
- Supplier invoices, pro-forma invoices or purchase orders
- Details of your main suppliers and how long you’ve dealt with them
- Recent business bank statements and BAS
- Sales history for the imported stock
- ABN or ACN and photo ID for directors
What are the alternatives?
- Stock and inventory finance — funds stock without the transaction-by-transaction structure.
- Business line of credit — flexible limit for smaller or irregular orders.
- Invoice finance — funds the sales side if your customers are businesses on terms.
- Seasonal finance — when the big order is part of a predictable annual cycle.
Is your cash spending too long at sea?
If your growth is limited by how many containers you can afford to pay for at once, trade finance could change the whole rhythm of your business. We’ll look at your order cycle and tell you whether it suits — or whether a simpler limit would do.
Enquiring won’t affect your credit file — there’s no credit check at that stage. We don’t distribute your details to a list of lenders, and a lending specialist will call you directly. Accurate details about order sizes, lead times and how fast stock sells help us match you first time. See if you qualify.
Frequently asked questions
What does trade finance pay for?
Mainly supplier payments for goods — deposits and balances to overseas or local suppliers. Some facilities can also cover associated costs such as freight, duty and GST on importation.
How is trade finance repaid?
Each drawing usually has its own term, often set to allow time for goods to ship, land, clear customs and sell. You repay that drawing at the end of its term or as stock sells.
Do I need to be an established importer?
It helps. Financiers like to see a track record with suppliers and a history of selling the stock you import. Newer importers may start with smaller limits or use other finance.
Is trade finance only for overseas suppliers?
No. While it's most associated with importing, many facilities also fund payments to local suppliers.