Trade finance vs Invoice finance
These two facilities fund opposite ends of the same working capital cycle. Trade finance pays your supplier so goods can move. Invoice finance releases cash once the sale is invoiced. Businesses that import and resell usually need both, and choosing only one leaves a funding gap in the middle.
| Criterion | Trade finance | Invoice finance |
|---|---|---|
| Point in the cycle | Before shipment and delivery | After the invoice is raised |
| Security | Goods, documents and the underlying contract | The sales ledger |
| Typical tenor | 60 to 180 days per transaction | Revolving against invoice payment |
| Cost basis | Per transaction fee plus interest for the tenor | Discount margin plus service fee on turnover |
| Underwriting focus | Counterparties, goods and route | Debtor quality and dilution history |
| Best fit | Importers, distributors, contract manufacturers | Businesses invoicing creditworthy trade customers |
A trade line pays your supplier at order or shipment. When the goods arrive, are sold and invoiced, the receivables facility advances against that invoice and repays the trade line. Structured properly, the two facilities hand off to each other and the business never funds the cycle from its own reserves.
Where they are arranged separately, the security documents often conflict and one funder ends up refusing to release. Arranging both together avoids that entirely.
If your customers pay on delivery or on short terms, the receivable exists for days rather than months and a trade line covers the whole exposure. Adding invoice finance in that case adds cost without releasing much cash.
Service businesses, recruiters, hauliers and contractors have no supplier purchase to pre fund. Their cash is locked entirely in the ledger, so receivables finance solves the whole problem on its own.
If you buy goods before you sell them, you need trade finance. If you sell on credit terms, you need invoice finance. Importers and distributors almost always need both, arranged as one structure.
Some can, and the documentation is simpler when they do. Where two providers are involved, an inter creditor position needs agreeing before drawdown.
Invoice finance is usually cheaper per pound of funding because the security is more liquid. Trade finance is priced per transaction and reflects counterparty and route risk.
Yes, and combining them is one of the most common structures we put in place. There are no upfront fees.
Not sure which route fits? Describe the requirement once and we will structure it and approach the providers whose criteria match. No upfront fees — charges are due only once funding is in place.
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