It’s no secret that cashflow is the life blood of pretty much any business and mismanaging your cashflow will likely lead to a failed business and bankruptcy. This is where trade finance comes in. Trade finance helps to supplement the cashflow of brands and manufacturing companies to help reduce the time with limited funds between ordering a product and selling it.
Trade finance is such a key aspect of so many businesses that some sources say over 80% of global trade depends on trade financing. As an industry, trade finance accounts for around 3% of global trade amounting to over $3 trillion annually. With an industry this large, there’s bound to be a lot of options. Here is a great tool to compare some of your options.
Trade Finance for SMBs
Trade finance has mostly been geared toward large enterprises, often leaving small and medium sized businesses (SMBs) behind. Traditionally, banks and financial institutions have refused to lend to SMBs because due to their lack of assets, credit history or predictability of business cycles. Ironically, these are the exact problems SMBs are trying to solve with trade financing.
With that said, companies are quickly realizing trade finance for SMBs is a mostly untapped market ripe for disruption. As the manufacturing industry continues to become more fragmented and splintered this section of trade financing will only continue to grow.
Manufactured decided to dig into a few of these innovative fintech startups who are empowering SMBs with more options to keep their cash flow moving. There’s certainly a lot to be done but these startups are trying to pave the way towards ubiquitous trade credit and empowered lending.
The first company we’ll look at is crowdz. They took a crowdsourced approach to trade financing. By offering thousands of pre-vetted funders, they are able to provide trade financing to businesses of all sizes.
By utilizing blockchain technology with an Ethereum backbone, Crowdz digitized all documentation required in a simple way. This greatly reduces both the time and labor it takes to process a trade financing transaction for both the lender and buyer. This is how they are able to attract their thousands of pre-vetted funders.
Tango Trade essentially offers an escrow system for buyers and sellers to utilize drastically reducing the risk of a buyer defaulting on payment or a seller never shipping the purchased product. The buyer sends payment to Tango Trade, then Tango Trade sends the payment to the seller once they can confirm the seller has shipped the goods that were sold.
Similar to Crowdz, they also digitized all of the paperwork. All paperwork that would normally be required for an escrow transaction is stored right in Tango Trade’s system. This makes for easy organization and accessibility of the forms that both the buyer and seller will regularly need to access.
Since Tango Trade is bonded, insured, and has bank-grade security, their escrow system is safe and easy to use. This really makes them a great option for any of the 74% of SMBs whose credit applications were denied.
Unlike the other two, Paystand is a dedicated SaaS made for sellers to offer buyers financing for their purchases. Just like the other companies, they help remove the burdensome paperwork required in transactions for both the buyer and the seller. This can give sellers a competitive advantage by making transactions easier for buyers.
They support payments through eCheck & ACH or debit & credit cards. With real time bank verifications, you will never lose a customer again from a lengthy check-out process. You can also steer customers to your preferred payment method by offering discounts based on the payment method they use. You can also customize the checkout process to be integrated with your branding.
Which is Best for You?
Crowdz is a great option for small-medium sized 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, only using them when it makes sense.
Tango Trade is more aimed for mid-sized businesses as an escrow payment system. Their high security for both buyers and sellers cannot be understated, as they are bonded and insured just like any other bank would be. They also remove a lot of time spent on paperwork out of the process by keeping everything digitized and documented within their system.
Paystand 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 reinforce your brand image in the buyer’s mind.
