What is Trade Finance?
Trade Finance has been reviewing the global trade market since 1983. The remit of what we cover is somewhat broad, and as the market evolves to meet the requirements of financing global trade, so our content has changed.
Meridian Enterprises Solution provides Trade Finance solutions in to three categories viz., Metals, Mining, Energy and Soft Commodities.
Meridian Enterprises provides liquidity management and risk mitigation for the production, purchase and sale of commodities and materials. This is done by isolating assets, which have relatively predictable cash flow attached to them through pricing prediction, from the corporate borrower and using them to mitigate risk and secure credit from a lender. A corporate therefore borrows against a commodity's expected worth.
Trade finance is used when financing is required by buyers and sellers to assist them with the trade cycle funding gap. Buyers and sellers also can also choose to use trade finance as a form of risk mitigation. For this to be effective the financier requires:
- Control of the use of funds, control of the goods and the source of repayment
- Visibility and monitoring over the trade cycle through the transaction
- Security over the goods and receivables.
Structured Commodity Finance Solutions
Structured commodity finance (SCF) as covered by Trade Finance is split into three main commodity groups: metals & mining, energy, and soft commodities (agricultural crops).
SCF is a financing technique utilized by a number of different companies, primarily producers, trading houses and lenders. Commodity producers stand to benefit from SCF by receiving financing to ensure cash flow is available for maximum output with the intention of repaying the loan once exports begin.
Trade credit and Political Risk Insurance / Re-Insurance
Trade credit, political risk insurance or credit insurance is a large sector of trade finance and one that is of increasing demand as conflicts arise worldwide.
Trade credit is the capital that is provided by financiers to their firms purchasing products, so they do not have to pay suppliers from their own balance sheet at the point of purchase. This provides the customer with a longer repayment period, therefore allowing them to free up their cash flow.