There exist many service providers for trade finance, thus it becomes crucial for business owners to choose the correct lending institution to access credit. Providers are generally categorised as:
Some commercial banks include specialised trade finance divisions, to offer facilities to businesses. Majority share of financial institutions globally are represented by commercial banks. Commercial bank may range in size from small and niche banks to large multinational banks.
The financing services offered by trade finance commercial banks include:
The global presence and credibility of commercial banks is a key factor for getting trade finance from them. However the small domestic banks can be advantageous for SMEs. Being niche, it will be easier to accommodate the specific needs of SMEs.
Development Finance Institutions
Development finance institutions (DFIs) are also known as development banks. These help to provide trade finance for promoting economic development. These are often country- specific, as well as target specific. These can be classified as per mid- to long-term trade finance within the agricultural, mining and projects sector. Development finance institutions provide
DFI’s are often directly or indirectly funded by governments. Such institutions operate as joint ventures in emerging markets. They can even provide insurance and guarantees as the countries may face political and socio-economic risks.
Even there are Export Credit Agencies (ECAs), which are generally government backed institutions to guarantee a domestic company’ exports.
Alternative Finance and Non-Bank Funders
Certain types of financial institutions do not use public deposits as a funding resource. Such funding sources include
Because of economic crises traditional receivables- backed finance was disrupted by smaller finance platforms which lead to decrease in appetite in terms of risk by larger banks. From such situations the doors for smaller finance lenders were opened to fill in the gap that arose due to the economic crisis. Alternative finance such as private investment funds and crowd-lending (peer to peer) entered the trade finance sector.