GETTING PAID
BEFORE YOU GET PAID.

Reference

Wholesale runs on a gap: you buy or make the goods, ship them, and get paid sixty days later. Trade finance is the set of instruments that bridge that gap, and choosing between them is a question about who you do not trust, not about which is cheapest.

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What to know

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 GRAJ 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.

Where to go next

OPPORTUNITIES

In your account — sign in and it opens on your own figures.

Open

FACTORING, AT SMALL SIZES.

Factoring solves the wholesale cash gap: you sell an unpaid invoice at a discount and get paid now instead of in sixty days.

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DECIDING WHO GETS CREDIT.

Credit decisions in wholesale are made on thin information, which is why they default to proxies — how long you have traded, who introduced you, whether you look like previous borrowers.

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GLOSSARY

Every term on GRAJ, defined in plain words.