Financing Down Under

In the simple days of banking (note I wont refer to it as “the good old days”) financing trade credit used to be simple and working capital finance options were easy to understand.  If you had short terms gaps in liquidity, your banker would provide an Overdraft Facility.  If you had longer terms needs, perhaps a Bill Financing facility.  In today’s world, while the overdraft and market rate facility remain relevant, the types of Trade Finance products that banks can provide is now much more in tune with the trading cycle of a company.

This has changed the way banks finance trade in several ways:

  1. Technology and cloud solutions have enabled banks to provide financing solutions from One Large Corporate Approving an Invoice for a Network of their Suppliers
  2. The movement away from Cross Border Trade being Letter of Credit based has forced banks to become more creative in both their platforms and financing arrangements.
  3. More active use of Credit enhancement of receivables has allowed banks to offer finance based on a percentage of the Inventory and/or Receivables outstanding.


Michael Wood, Head of Trade Finance and Invoice Finance Products at the National Australia Bank (NAB) in Australia, mentioned the past decade has introduced a new digital and information age.  This in turn has stimulated a range of financing solutions that reflect an ability to satisfy a broader range of needs and to solve a wider range of problems, often not just for a single customer, but also for the trading partners (suppliers and/or buyers) of the customer.


Our bank now views trade finance lending more from the Corporates trading cycle, including the Corporates domestic and international Procurement and Sales. 

 The ability to do this, in Michael’s view, is that Trade finance enables greater flexibility than a market rate facility, and has a lower cost structure than overdraft by providing fixed rate funding of required amounts for required periods in a currency that suits the business need. Trade finance can serve as an efficient financing tool to support payments to suppliers or to finance extension of payment terms to buyers.

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