In today’s interconnected world, small and medium-sized businesses (SMBs) are increasingly venturing into global trade to seek growth opportunities beyond their local markets. However, this practice comes with its fair share of challenges, particularly when managing the risks associated with international trade.
Digital trade finance companies can provide SMBs with the tools, expertise, and innovative solutions to mitigate these risks and thrive in the global marketplace. They offer a myriad of benefits that go beyond traditional banking services, with a tailored approach to addressing the unique needs of SMBs.
Enhanced Risk Assessment
Alternate lending companies use a data-driven risk assessment model that captures hundreds of direct and indirect data sources. Information retrieved, for instance, from credit bureaus, trade data services, insurers, etc., helps risk specialists evaluate the prospects’ creditworthiness. The risk parameters are constantly updated through these integrations and based on geopolitical scenarios to enhance decision-making further.
Some companies also conduct background checks for every new buyer, assisting exporters to avoid fraud and make informed decisions.
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Flexible Payment Terms
SMBs often need help with working capital being tied up in long sales cycles, hindering their growth. Trade finance companies offer several buyer- and supplier-specific solutions, enabling flexible payment terms and the delivery of goods. Building a positive buyer-seller relationship is crucial for enhancing business performance and gaining a reputable global market presence.
Additionally, fintech partners assist traders in streamlining complex processes like documentation, invoicing, and cash flow management, allowing them to focus more on core business activities.
Build Tech-Led BusinessesÂ
An Organization for Economic Co-operation and Development (OECD) report suggests digitalization offers the potential to alter existing trade finance patterns and provide new opportunities to SMBs With a little push from trade financiers, the effects of this change will be seen among small businesses, which are increasingly adopting technology.
SMBs have started investing in digital tools across the supply chain for better visibility and transparent operations. With machine learning and advanced analytics, they can plan orders, track goods, automate quality inspection, forecast expenses, store records, fast-track/monitor vendor payments, and much more.
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Tailored Solutions
Traditional financial institutions seek collateral; their loan processes are lengthy and paper-driven. Moreover, they consider SMBs risky and prefer to work with large corporations.
Alternate lenders offer customized financial products like invoice factoring, buyer financing, inventory financing, etc, for SMBs. This gives them easy and safe access to additional working capital, helping SMBs invest in new growth opportunities and maintain financial stability.
In fact, research suggests the global alternative financing market was valued at USD 10.82 billion in 2022. It is anticipated to grow at a CAGR of 20.2% from 2023 to 2030.
Ecosystem Partners
Although limited access to credit is the primary pain point of SMBs, these businesses regularly face operational challenges related to customs, insurance, logistics, etc.
Trade finance companies have strategic alliances with key players in the trade ecosystem and are backed by reputable global investors. Through partnerships, they offer customers value-added services such as shipment tracking facilities, KYC checks, insurance, documentation support, efficient payment mechanisms, etc.
In short, these companies provide a one-stop solution for SMBs to meet all their trade-related needs.
Conclusion
International trade is a game of leveraging commercial relationships scientifically and artistically. Trade finance companies prove they have skin in the game, and SMBs who work with them can reap comprehensive benefits.
Today, however, SMBs require more than mere financial support. They seek modern financiers with technological expertise who understand their needs and can innovate as per evolving times, helping SMBs navigate international trade challenges.
