TRADE FINANCE
ON PROTOCOL.

The instruments, from most to least protective

Each one shifts risk somewhere else and charges for it. Advance payment protects the seller completely and is the hardest to win; open account protects the buyer completely and is what established relationships default to.

• Advance payment — buyer takes all the risk
• Letter of credit — a bank pays against documents, not against goods
• Documentary collection — the bank passes documents but does not guarantee payment
• Open account — you ship and invoice, and hope

A letter of credit pays on documents

This is the detail that catches first-time exporters. The bank checks whether the paperwork matches the credit, not whether the goods arrived or were any good. A discrepancy as small as a misspelled name can suspend payment, and roughly half of first presentations are rejected somewhere.

Factoring and PO finance are different things

Factoring advances against an invoice that already exists — the goods have shipped. Purchase-order finance funds the making of goods against an order that has not shipped yet. The first is cheaper because the risk is smaller.

• Quoted rates are per period, not per year
• 2% for 30 days is roughly 24% annualised
• Reasonable for a cash gap, expensive as growth capital

What the protocol records

GRAJ records funding offers, agreements, drawdowns and covenants against the orders they relate to, so the position is one query rather than a spreadsheet. It is not a lender and does not price credit.