Key takeaways

• What it is: Trade finance pays your overseas supplier on your behalf, so the months between ordering stock and selling it are funded by a lender instead of your bank account.
• The gap it closes: A typical import cycle runs 90 to 150 days from supplier deposit to sold stock, and every dollar of it normally comes out of your working capital.
• How repayment works: Each drawdown is repaid as the stock lands and sells, and the facility resets for the next order without a new application.
• Who uses it: Australia had 124,507 business importers in 2024-25, up 6% in a year, and most of them pay suppliers long before their own customers pay them.
• How to get it: Facilities differ widely on security, fees, and repayment windows, so a broker comparing specialist lenders is the practical way in.

If you import stock, you know the uncomfortable maths. Your supplier wants a deposit at order and the balance before the goods ship. Then the container spends weeks on the water, the stock takes weeks to sell, and your customers may take another month or two to pay. You have paid for everything and been paid for nothing. Trade finance carries that gap for you, and this guide explains how it works from the first supplier invoice to the day the stock is sold.

Why the import payment cycle strains cash

Importing keeps growing. Total goods and services imports rose 4.4% to $629.9 billion in 2024-25, and business importers grew 6% to 124,507, according to the Australian Bureau of Statistics. Behind each of those importers sits the same timing problem: suppliers are paid at or before shipment, customers pay well after delivery.

The back end of the cycle is not getting faster either. The Payment Times Reporting Regulator found that the average time for a large business to pay 95% of its small business suppliers stretched to 64 days in the most recent reporting period, up from 58. If your customers include bigger businesses, the money can sit outstanding for two months after you have already funded the stock for four.

How a trade finance facility actually works

The mechanics are simpler than the name suggests. Once a facility is set up, the lender pays your overseas supplier directly against your purchase order or supplier invoice. That payment is a drawdown: a borrowing against your approved limit, tied to that shipment. You repay the drawdown as the goods land and sell, usually within an agreed window, and the limit becomes available again for your next order. The facility revolves, so you are not reapplying every cycle.

A few terms are worth knowing in plain language. A letter of credit is a bank-backed promise that your supplier will be paid once they meet the shipping conditions, which often unlocks better terms from a factory that does not know you. The security is commonly the stock itself, registered on the Personal Property Securities Register, rather than your house. And the repayment window on each drawdown is typically measured in months, sized to how long your stock realistically takes to land and sell.

Trade finance sits in the same family as inventory finance, which funds stock purchases with the stock as security, and the two are often structured together. The right shape depends on whether your pressure point is the supplier payment, the holding period, or both.

What it costs and what lenders look at

Trade finance is priced in parts rather than one headline rate, and a broker sets these out before you commit:

• Interest on each drawdown: Charged on the amount advanced for the time it is outstanding. Fast-selling stock generally attracts sharper pricing than seasonal lines, because the lender's risk sits in how quickly the goods sell.
• Establishment fee: A one-off setup cost covering stock assessment and documentation, typically higher than for a simple cash facility because the lender takes a charge over the goods.
• Transaction fees: Paying an overseas supplier involves international transfer, currency conversion, and letter of credit costs where one is used.
• Setup lead time: First-time setup commonly takes one to two weeks, so arrange the facility before the order is urgent, not after.

Lenders mainly want a trading history, sensible margins on the funded goods, and evidence the stock sells. What they price hardest is uncertainty, and that is where structure matters: the Reserve Bank's research on small business finance found the most common frictions are strict lender requirements, long processing times, and demands for property security. Specialist trade lenders exist because mainstream facilities handle importing poorly, but finding the right one is not something a busy importer can do by ringing around.

A realistic scenario

Picture a Sydney homewares importer turning over $2.4 million a year. Their Vietnamese factory wants 30% down on order and 70% before shipment. A typical $180,000 order consumes $54,000 at order and another $126,000 five weeks later, then spends a month at sea and three months selling through. From first payment to fully sold is around five months, and cash can only fund one order at a time, which caps growth at whatever the bank balance can carry.

With a trade finance facility, the lender pays the factory directly at both stages. The importer repays each drawdown as retailers pay their invoices, and the facility resets. Ordering is no longer rationed by cash on hand: the business runs two overlapping orders instead of one, keeps stock available in peak season, and its own funds stay free for wages and marketing. The facility costs real money in interest and fees, but the margin on the second order it enables is worth far more. Their broker also pairs the structure with cash flow finance for the general timing gaps that sit outside the import cycle.

Getting the structure right

The difference between a facility that works and one that hurts is fit. The repayment window has to match your real sell-through time, the limit has to cover overlapping peak orders, the security should rest on the stock rather than your home where possible, and the fees have to suit how often you order. Those are lender-by-lender differences, and they are what a broker compares across specialist trade and inventory lenders, then negotiates and documents on your behalf. You place the orders. The funding follows them.

What matters most

Trade finance turns the worst part of importing, paying months before you are paid, into a funded and repeatable cycle. The lender pays your supplier, the stock repays the lender, and your cash stays in the business doing everything else. Whether it works for you comes down to structure: repayment window, security, limit, and fees, all matched to how your stock actually sells. That match is broker work, and it is the difference between funding your growth and strangling it.

This article is general information only and does not take your circumstances into account. Consider your own situation, and seek advice where needed, before acting on it.

Ready to fund your next import order without draining your cash? Speak to a broker about trade and inventory finance here.