Specialist finance

What is export finance?

Exporters have unique funding needs that traditional banks or even the larger export finance companies don't always meet. Export finance allows exporters to access the payment for their goods before their arrival overseas, meaning they can fill the monetary gap caused by a long transit or invoicing periods. Export finance is, essentially, an advance loan that helps exporters pay their costs before receiving payment from the other end.

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What is export finance?

Export financing is a financial service that helps businesses to sell their products overseas. It can cover a range of scenarios, from providing credit to paying for the goods on behalf of the customer when they are delivered. There are two ways in which export finance can be done.

In an advance payment export finance contract, you make a deposit or partial payment before receiving the goods. You pay the remainder of your debt once you have received them. This type of product is most commonly used by large businesses that wish to reduce risk and ensure that they have enough money to pay their suppliers whilst still making a profit on each transaction.

In documentary credit export financing, you make payments at intervals throughout an order's fulfilment rather than waiting until delivery has been made. This type of product is helpful if you want to take advantage of currency fluctuations and spread out transactions over several months or years rather than taking all your payments at once with one invoice.

How does export finance differ from trade finance?

You may hear export finance and trade finance used interchangeably - but while both relate to the exporting of goods, they do differ slightly. Export finance is a type of finance that banks and other financial institutions usually provide. It allows exporters to sell their goods or services overseas, typically providing them with working capital until they get paid.

Trade finance is another form of international commercial financing; it's available for both the sale of goods and services. Unlike export finance, trade finance often takes shorter terms (under 30 days). Trade finance is usually for the importer; export finance is for the exporter. Trade finance is short term; export finance is long term.

How can I get export finance in Australia?

The first step in getting export finance is to decide what kind of finance you need. This will depend on the size and nature of your business and what products or services it provides.

There is a range of different types of products available to help businesses access export finance, including:

  • Bank loans
  • Export credit agencies (ECAs)
  • Factoring companies

Disclaimer: always refer to professional advice. The information presented here is purely indicative and not intended as advice. Always consult a legal or finance professional.

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