Baskadia

Small & medium-sized enterprises ie. SMEs have long been considered one of the key drivers for economic growth along with an exceptional ability to fuel employment in a country. The importance of SMEs in the global economy lies in the report issued by the World Trade Organization according to which SMEs represent over 90 percent of the business population, creating 60-70% of job opportunities and 55% of GDP in the developed economies. 

But unfortunately, despite their remarkable contributions to global trade development, the struggle of SMEs in securing affordable & flexible financing is not showing any positive signs, especially in international trade transactions. Many SMEs are unable to borrow from the traditional banks & have limited access to financial services leading to low productivity & exports. But why? The reason behind this lack of working capital is caused by imposed complexities by banks while applying for a loan. These institutions have become extremely risk-averse and are not willing to provide funding to companies with smaller balance sheets. 

Here, applying for global trade finance enables small & medium-sized enterprises to execute overseas transactions with sufficient cash flow. In this blog, we are explaining why SMEs opt for international trade finance. Let’s find out:

1. Flexible & Scalable Funding -

SMEs provide their greatest contribution to a country’s economy yet are facing a lack of sufficient working capital that can accelerate their scalable growth in the global market. Here international trade finance providers like Emerio Banque understand their requirements by thoroughly evaluating the transactions they are executing and provide them with suitable, flexible & secure trade finance solutions to fulfill their business goals. By eliminating financial hurdles, SMEs can uninterruptedly ship the ordered goods on time and thereby kickstart productivity & trustworthy relationships with foreign importers. Invoice factoring provides credit protection, working capital & peace of mind regarding payment from the importers.

2. Cut Backs Banks’ Increased Complexities While Lending To SMEs -

Most banks are not willing to finance a trade transaction being executed by an SME in the global market due to their smaller balance sheet and an inability to provide any security which is commonly determined by their line of credit. Plus, they conduct a thorough check on the exporter’s financial stability that takes a lot of time and results in late loan approval. This limits SMEs' opportunities to maintain cash flow & enter into global transactions. Global trade finance Services like Bank Guarantee provide them instant working capital and accelerate cash flow by financing shipment. Also, the favorable part is that the funding is determined by the credibility of an exporter’s client, instead of the exporter’s, unlike traditional banking loans. Plus, trade finance services don’t show up as debt in SMEs’ balance sheets. They can receive payment as soon as they submit an invoice.

Read more: https://www.emeriobanque.com/blogs/trade-finance-and-smes-reasons-why-smes-opt-for-trade-finance