What is trade finance?
Trade finance is a kind of support for the movement of goods traded by the provision of dedicated funding as a bridge among exporters' outlet and receipt of sales proceeds.
With the aid of trade finance, the exporters can receive fund earlier once the goods shipped which can enhance their financial performance and reduce operating risks.
Mechanism of Trade Finance
Fund payment and collection
by service provider
Logistic (if applicable)
Why trade finance become popular?
The traditional financial service providers like banks cannot adapt with the variation of regulatory environment towards its customers especially for those small and medium enterprises. Thus, the new specialist fund of trade finance emerge to bridge the gap.
In addition, the unique property of low risk and high recovery rate of trade finance attract consideration of investors in a diversified investment profile.
Reason for invest?
Customers are required to submit their financial reports for assessment before getting credit to reduce investment risk
The tenors of deals are usually short term and the investment profile can be tailored according to its capital growth
Most global trade is accepted by trade financing and the proportion is experiencing an upward trend
- Average default rate -
The average default rate of loan is quadruple than that of trade finance product.
Frequently Asked Questions
Is it safe to invest in trade finance?
The risk in trade finance is much lower than that of other investment products. Different kinds of regulations exist in the approval of trading transaction.
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