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The International Trade Center (ITC) and its partners launched the SME Trade Finance Guide at the SME Finance Forum. The guide aims to help small and medium-sized enterprises (SMEs) exporters and importers learn about and access trade finance.

The guide defines trade finance as “the financing of goods or services in the course of a trade or transaction, from a supplier to the end buyer”. Trade finance accounts for 3% of world trade and represents approximately $ 3 trillion per year. Trade finance, also known as supply chain finance and import and export finance, is an umbrella term that includes a variety of financial instruments that importers and exporters can use.

The guide titled “Trade Finance Explained: An SME Guide for Importers and Exporters” describes the types of trade finance structures available to importing and exporting SMEs. These include trade credit, cash advances, purchase order financing, debt discounting, term loans, and other types of corporate finance such as equity finance, asset-backed leasing and financing; and asset financing. The guide provides an overview of payment methods, including cash advances, letters of credit, documentary collections and open accounts, and describes the suitability of each method for various business requirements. The guide highlights the risks and challenges associated with products, manufacturing, transportation and currency, and explains how to access trade finance from different loan sources.

The guide recognizes the impact of the COVID-19 pandemic on SMEs’ access to trade and export finance. In this context, the guide describes the opportunities to help SMEs recover from the impacts of the COVID-19 pandemic and respond to new orders. Trade in some markets and sectors is picking up, with levels equal to or higher than the same period in 2019, he notes.

Commenting on the publication of the guide, ITC’s senior advisor on access to finance, Ian Sayers, said trade finance was seen as the business of international buyers. Sayers said it was “time for SMEs to realize their potential to help them move into new markets, obtain new certifications, expand their workforce and make improvements in durability”. He expressed hope that the guide will stimulate the enthusiasm of SMEs to explore locally available trade finance mechanisms.

A number of organizations and institutions have contributed to the guide, including ITC, Trade Finance Global, Federation of Small Businesses, Institute of Export and International Trade, British Exporters Association, Forum of Private Business and the International Finance Corporation (IFC). [Publication: Trade Finance Explained: An SME Guide for Importers and Exporters] [Guide Landing Page] [ITC Press Release]