What Is Trade Finance?

October 19th, 2018

What Is Trade Finance?

Trade Finance is something many NI Businesses may not be aware of as up until recently it
wasn’t an available option. In response to on-the-ground feedback, local funder, Upstream
disrupted the market in 2018 by introducing a brand new Trade Finance option for clients.

Here, Judith Totten (MBE) MD and founder of Upstream explains what exactly Trade Finance
is and how it has the potential to play an important role in unlocking growth for NI business
and tackling enterprise inequality.

A tool for growth
Put simply, Upstream’s Trade Finance solution bridges a gap where organisations require
additional growth funding, quickly, to deliver orders beyond their current capability. It is the
introduction of a third-party to transactions to remove payment and supply risk. For example,
if a local manufacturer received a large order that required additional investment in packaging
materials and raw ingredients, a trade finance funder would step in and finance the supply
chain on the back of the secured order so that it could be fulfilled on time. Repayment terms
are typically short-term, say 90 days, where the funding is returned shortly after orders have
been delivered and paid for.

A complementary solution
Trade Finance can work as a standalone facility or it can complement other funding tools. For
example, it works very well alongside Upstream’s core Invoice Finance offering which
effectively provides strong cash-flow for businesses based on the value of invoices they raise.
This effectively affords the user an ‘end to end’ or ‘supplier to buyer’ funding solution – unique
in NI. Specially designed for ease of use and simplicity, Trade Finance doesn’t impinge on any
pre-existing Bank security that’s already in place as Upstream simply becomes another trade
creditor in the user’s balance sheet. Since its introduction, the new funding generated by
Upstream into the supply chain of NI has been skewed towards standalone facilities
complementing existing Bank lines, thereby proving that the delivery is seamless and tailored.

Tackling enterprise inequality
Trade Finance is a fantastic way of tackling enterprise inequality as it broadens supply chain
relationships so that even small-scale players with innovative products have the opportunity
to compete with the larger corporates with established reputations who together may be
holding a monopoly over the market.

That being said, Upstream Trade Finance is also helping larger organisations access ‘top up’
cash to assist with buying opportunities that can arise from time to time or seasonal shifts in
cash demand which typically the bigger mainstream funder is not nimble enough to support
within tight timescales.

Going against the norm
As a business, Upstream goes against mainstream preconceptions of funding through
traditional banking routes and offers bespoke solutions by working closely with our clients.
Because of our own unique business model, as growth-enablers, we appreciate that
sometimes businesses need external support to grab an opportunity and thrive. That is one
the main reasons we have introduced our Trade Finance option. It isn’t about taking business
away from Banks or other funders, it’s about bringing more choice to the market and
empowering businesses to meet demand. It is about filling what we see as the ‘Forever Gap’
in the funding landscape – that piece before the manufacturing cycle and the sale, which
challenges businesses large and small.

Why now? Why NI?
At Upstream, we’re very excited to be the first to bring this type of finance solution to
Northern Ireland as it has the potential to unlock major growth for businesses struggling to
keep up with demand and those at risk of losing crucial order pipelines due to the unnecessary
delays and tick-boxing exercises associated with some traditional lending streams.
Trade Finance is a low risk tool for boosting supply chains which in turn creates new jobs,
supports employees and provides the financial base needed for businesses to plan confidently
for the future. Although Northern Ireland (NI) and indeed the rest of the UK is experiencing uncertainty at present, live market feedback tells us that there is a strong appetite for innovative funding
mechanisms like Trade Finance that reduce risk, boost order books, facilitate greater access
to the importation of stock and raw materials and extend export routes.

Creating waves
Since introducing Trade Finance to the market, Upstream has already seen business owners
jump at the opportunity to take control of their working capital needs from supplier to buyer.
Within 4 months of its launch, Upstream’s Trade Finance solution has facilitated £2m worth
of trade finance transactions, far surpassing initial projections and giving enhanced confidence
that it is very much here to stay long term as a tool to support the growth of NI businesses.

Upstream works closely with ambitious local Northern Ireland companies to understand
what they require now and horizon-scan for what they will need well into the future.
With a strong emphasis on working collaboratively with existing lenders, Upstream
prides itself on its ability to make quick locally-based decisions and find solutions that
ensure businesses flourish and grow.

To find out more about Upstream visit: https://www.upstreampositive.co.uk
Alternatively contact MD, Judith Totten judith@upstreampositive.co.uk or Sales Director,
Alan Wardlow alan@upstreampositive.co.uk

To discuss opportunities in any of these areas, please get in touch with one of our partners.

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