What is What is Trading Finance?
A trading business loan can be used for a variety of purposes: buying inventory, helping with cash flow, covering day-to-day expenses or investing in growth opportunities. These loans can be short- or long-term. They typically offer competitive interest rates and flexible repayment.
How Does Trading Finance Work?
Here’s a quick overview:
Term and Repayment:
Trading business loans usually have a term of up to seven years. Because they are designed to fit around your cash flow, repayment options vary. Depending on the lender, you may be able to make flexible payments over a set period, use an amortised repayment structure, or settle all outstanding debt in a ‘balloon payment’ at the end of the term.
Interest Payments:
Interest on trading business loans can be fixed or variable. The rate is likely to be competitive, but will depend on factors such as your business’s credit score, the lender’s policies and the amount of the loan. How you repay the interest will depend on the specific repayment terms you agree with the lender.
Lender Requirements:
Trading business loans are usually available to businesses that have been trading for a minimum of six months. In addition to trading history and credit score, you may need to show proof of regular income to be approved for a loan. Newer businesses are typically regarded as higher-risk. Your eligibility will usually increase once your business has been operating for two years.
Why apply for trading finance?
Cashflow is one of the biggest issues for businesses at any stage of development. It’s common to find yourself without income while you wait for creditors to settle outstanding payments. Many businesses fail precisely because of gaps in cash flow that make it impossible to cover day-to-day expenses.
A trading business loan helps to bridge these gaps. Designed to fit around your existing cash flow, trading finance allows you to invest in your business as and when needed, whether that’s buying inventory, paying bills, or seizing an exciting new opportunity. With flexible repayment terms, you’ll usually be able to repay the loan on a schedule that suits you, further reducing your financial stress.
What can I do with a trading business loan?
The purpose of a trading business loan is to enable you to operate your business regardless of fluctuating cash flow. You can use it to cover overheads such as staff costs, rent and utilities, buying stock and purchasing services and equipment. You can keep it in reserve as a cushion to cover unexpected outgoings, or bridge those cash flow gaps that would otherwise affect the daily running of your business.
However, you can also use trading finance to grow your business. Perhaps you want to move to new premises, expand into a different area, or simply take advantage of opportunities as they arise. So long as you can meet the lender’s requirements, a trading business loan can be a way to pursue those plans and proactively increase your business’s earning potential.
Trading Finance
Access flexible funding to support purchasing, fulfil larger orders and manage cash flow gaps.
Structured trading finance helps you secure stock and complete transactions without tying up working capital.