Cashflow is the life blood of a business. Trade Finance supplements the cashflow of brands and manufacturing companies – mismanagement can lead to certain failure and bankruptcy.

Some facts about Trade Finance:

  • Trade financing (also known as supply chain and export finance) is a huge driver of economic development and helps maintain the flow of credit in supply chains. “It is predicted that 80-90% of global trade is reliant on trade and supply chain finance.” – Trade Finance Global
  • Trade finance is worth over $3 trillion annually- Trade Finance Global
  • Essentially the transaction goes through a bank or similar financial institution so the exporter receives payment upon shipment and importer pays once they receive the goods through a line of credit. The exporter doesn’t have to worry about a default in payment by the importer and the importer is made sure all goods were sent by the exporter since it was verified by the financial institution.
  • Can either use a letter of credit or a bank guarantee
    • Letter of Credit: This is a promise undertaken by the importer’s bank to the exporter, saying that once the exporter presents all the shipping documents as spelled out by the importer’s purchase agreement, the bank will immediately make the payment to the exporter/seller.
    • Bank Guarantee: A bank acts as a guarantor in case the importer or exporter fails to fulfill the terms and conditions of the contract. The bank takes an initiative to pay a sum of money to the beneficiary.

Letters of Credit, Factoring, Forfeiting, Advances, Credit Lines, and other trade facilities have been around since the Medicis ruled the trade world 

But the problem SMBs in contract manufacturing and consumer brands have faced is ACCESS to tools and facilities to expand their business.

But Aside from the fine tuning companies can do with currency hedges, inventory controls, raw material purchases, etc – traditionally, only Large Corporates have had unlimited access to cheap capital, innovative credit lines, Banks and Financial Institutions refuse to lend to SMBs because of either their lack of assets, lack of credit history or lack of predictability in business cycles. Ironically thats exactly what these SMBs are trying to fight when they seek these trade finance facilities.

But in the modern world the truth is that brands, factories, and just companies are splintering and fragmenting at an accelerated pace. 

So Manufactured decided to dig into a few innovative fintech startups who are empowering SMBs with tools that could level the playing field. There’s a lot to be done for sure but these startups are trying to pave the way towards ubiquitous trade credit and empowered lending.

Innovative Companies:

  • https://crowdz.io/
    • Utilizes blockchain technology with an Etherum backbone
    • A crowd-sourced version of trade financing. Offers 1000s of pre-vetted funders.
    • No long-term commitments or access fees. Great option for small businesses that are growing and don’t want to be locked in.
    • B2B market-place for buyers and sellers of raw materials or finished products.
    • “One of the most pressing issues in global commerce today—and, in particular, in global supply chains—is the financial viability of the small and midsize enterprises, or SMEs, that account for 70% of all supply-chain participants. These SMEs typically have to wait for 90 days or more to be paid for the products they sell, yet they lack access to affordable ways of accelerating their cashflow.” CrunchBase
    • Sellers can sell back and finance their invoices directly through Crowdz
    • Focuses on digitizing all documentation required for trade finance, greatly accelerating and simplifying the process.
  • https://tangotrade.com/
    • Essentially an escrow payment system for buyers and sellers.
    • Buyer sends payment to Tango Trade. Tango Trade releases payment once seller ships the goods.
    • Bonded, insured, and has bank-grade security
    • No paper forms, everything is documented within their system
    • An alternative for any of the 74% of small-medium sized businesses whose credit applications get declined
  • https://www.paystand.com/
    • A SaaS based trade finance application
    • Offer flat-rate plans instead of percentage of transaction
    • More focused on buyer-side instead of seller-side, but helps sellers working with buyers using paystand.
    • Fully integrate checkout process with your brand
    • Offers payment through eCheck & ACH or Debit & Credit cards
    • Also uses blockchain technology as the backbone of the software
    • Offers automated collections
    • Real-time bank verification that supports 16,000 different banks
    • You can steer customers to your preferred payment method with customizable discounts based on what payment method they use.

Our thoughts:

  • Crowdz is a great option for small-medium sized business buyers and sellers that are quickly growing with their easy to use marketplace for getting your trade deals financed. No long-term commitments means you can outgrow their system and move on and only use it when it makes sense.
  • Tango Trade is more aimed for mid-sized businesses as an escrow payment system. Offers high security for both buyer and seller as they are bonded and insured. Removes a lot of time spent on paperwork out of the process by keeping everything digitized and documented within their system
  • Pay Stand is great for a seller to set up as their payment processing system. They are one of only a few SaaS businesses in the trade financing space. They offer a wide range of payment options which buyers will appreciate. You can fully implement your brand into their checkout process, which isn’t offered by their competitors. This is a great way to enforce your brand image in the buyers mind.