The International Trade Centre (ITC) and partners launched the SME Trade Finance Guide at the SME Finance Forum. The guide aims to help small and medium-sized enterprise (SMEs) exporters and importers learn about and access finance for trade.

The guide defines trade finance as “the financing of goods or services in a trade or transaction, from a supplier through to the end buyer.” Trade finance accounts for 3% of global trade and is worth approximately USD 3 trillion annually. Trade finance, also known as supply chain finance and import and export finance, is an umbrella term that includes a variety of financial instruments that importers and exporters can utilize.

The guide titled, ‘Trade Finance Explained: An SME Guide for Importers and Exporters,’ describes the types of trade finance structures available to SME importers and exporters. These include trade credit, cash advances, purchase order finance, receivables discounting, term loans, and other types of business finance such as equity finance, leasing and asset-backed finance, and asset finance. The guide provides an overview of methods of payment, including cash advances, letters of credit, documentary collections and open accounts, and describes the suitability of each method for various business requirements. The guide highlights product, manufacturing, transport, and currency risks and challenges, and outlines how to access trade finance from different lending sources.

The guide recognizes the impact of the COVID-19 pandemic on SME access to trade and export finance. Within this context, the guide outlines opportunities to help SMEs recover from the impacts of the COVID-19 pandemic and respond to new orders. Trade in some markets and sectors is picking up, with levels at or above those of the same period in 2019, it notes.

Commenting on the guide’s release, ITCs Senior Adviser on Access to Financing, Ian Sayers, reflected that trade financing has been seen as the business of international buyers. Sayers said it is “time for SMEs to realize its potential to help them pivot into new markets, get new certifications, expand their workforce and make sustainability improvements.” He expressed hope that the guide will stimulate SMEs’ enthusiasm to explore locally available trade-related financing facilities.

A number of organizations and institutions contributed to the guide, including ITC, Trade Finance Global, the Federation of Small Businesses, Institute of Export and International Trade, the British Exporters Association, Forum of Private Business, and The International Finance Corporation (IFC). [Publication: Trade Finance Explained: An SME Guide for Importers and Exporters] [Guide Landing Page] [ITC Press Release]