How to get trade financing for import/export?

This article was written by our expert who is surveying the industry and constantly updating the business plan for an import/export company.

Who wrote this content?

The Dojo Business Team

A team of financial experts, consultants, and writers

We're a team of finance experts, consultants, market analysts, and specialized writers dedicated to helping new entrepreneurs launch their businesses. We help you avoid costly mistakes by providing detailed business plans, accurate market studies, and reliable financial forecasts to maximize your chances of success from day one—especially in the import/export trading market.

What are the basic requirements to qualify for trade financing?

Import/export companies need to demonstrate operational stability, creditworthiness, and legal compliance to qualify for trade financing from banks and financial institutions.

Most lenders require your company to have been operating for at least 2 to 4 years with a verifiable track record in international trade. This operating history proves you understand the complexities of cross-border transactions and have established relationships with suppliers or buyers.

Your business and its owners must present satisfactory credit histories—typically a credit score above 650 for small to medium enterprises. Financial institutions will review your balance sheet, profit and loss statements, and cash flow reports from the past 2-3 years to assess your ability to repay the financing.

You'll need to be registered as a legal entity with proper documentation including articles of incorporation, business licenses, and trade permits specific to your industry. Collateral requirements vary but often include real estate, accounts receivable, inventory, or equipment valued at 120-150% of the requested loan amount.

A detailed business plan outlining your specific transaction, trading partners, payment terms, and use of funds strengthens your application significantly for import/export financing.

Which trade finance products should an import/export company use?

The five most commonly used trade finance instruments for import/export companies each serve different purposes and offer varying levels of security and cost.

What documents do you need to apply for trade financing?

Import/export companies must prepare a comprehensive documentation package covering both company credentials and transaction-specific details to secure trade financing.

Company documentation starts with your business registration certificate, articles of incorporation or association, and current business licenses. Financial institutions require audited financial statements for the past 2-3 years including balance sheets, profit and loss statements, and cash flow statements that demonstrate your import/export company's financial health.

Transaction-specific documents include the sales or purchase contract between you and your trading partner, detailing quantities, prices, delivery terms (Incoterms), and payment conditions. You'll need proforma invoices for advance planning and commercial invoices for actual shipments, along with detailed packing lists.

Shipping documentation such as bills of lading (ocean freight) or air waybills (air freight) proves goods are in transit. Marine or cargo insurance certificates protect the shipment and satisfy lender requirements. Some import/export transactions require certificates of origin, inspection certificates, or sanitary/phytosanitary certificates depending on the products and destination countries.

You must also provide proof of identity for all directors and shareholders (passports, national IDs), company tax identification numbers, and any relevant trade licenses or permits specific to your industry sector in international commerce.

You'll find detailed market insights in our import/export company business plan, updated every quarter.

How do letters of credit protect payment in import/export transactions?

Letters of credit transfer payment risk from the buyer to a bank, guaranteeing that your import/export company receives payment when you meet all specified conditions and submit compliant documents.

For exporters, an L/C ensures you'll receive payment even if the importer faces financial difficulties, as long as you present the required documents (commercial invoice, bill of lading, insurance certificate, inspection certificate) to the bank within the specified timeframe. For importers, the L/C ensures payment is only released when the exporter proves the goods have been shipped according to contract terms.

To minimize risk in your import/export operations, use irrevocable and confirmed letters of credit. An irrevocable L/C cannot be canceled or modified without agreement from all parties, providing certainty for exporters. A confirmed L/C adds a second bank—typically in the exporter's country—that also guarantees payment, eliminating country risk if the importer's bank faces problems.

Structure your L/C terms to match your actual shipping and transaction details precisely. Specify exact document requirements, acceptable shipping dates, expiry dates with sufficient buffer (typically 15-21 days after latest shipment date), and clear descriptions of goods that match your commercial invoices exactly. Ambiguous language like "approximately" or "about" creates discrepancies that banks can use to refuse payment.

Include clauses for partial shipments and transshipment only if your import/export transaction specifically allows them. Ensure all parties—your company, your trading partner, and both banks—understand the documentary requirements before the L/C is issued to avoid costly amendments later.

How can you use invoices and shipping documents to get working capital?

Import/export companies can convert unpaid invoices, confirmed purchase orders, and shipping documents into immediate cash through several short-term financing mechanisms.

Invoice factoring allows exporters to sell their accounts receivable to a financing company at a discount, typically receiving 70-90% of the invoice value within 24-48 hours. The factor collects payment directly from your overseas buyer when the invoice becomes due in 30-90 days. This works especially well for import/export companies with creditworthy buyers but tight cash flow during the production and shipping cycle.

Invoice discounting functions similarly but you retain control of collections—the lender advances funds against your invoice book, and you repay when your buyers pay you. This maintains your direct customer relationships in international trade without involving a third party in collections.

Purchase order financing provides working capital based on confirmed orders from your overseas buyers. When your import/export company receives a large order but lacks funds to pay suppliers or manufacturers, a PO financier pays your suppliers directly (typically 80-100% of costs). You repay the loan plus fees when your buyer pays for the delivered goods, usually adding a 10-25% markup to cover financing costs.

Bills of lading and other shipping documents can serve as collateral for short-term loans that bridge the gap between when goods are shipped and when payment is received. Import/export companies present the endorsed bill of lading to their bank, which advances 60-80% of the shipment value immediately. When the buyer pays, the loan is settled and the import/export company receives the balance minus interest and fees.

What are the current costs for trade financing products?

Trade finance pricing for import/export companies varies significantly based on the product type, transaction size, counterparty creditworthiness, and geographic risk as of October 2025.

Import/export companies in developed markets with strong credit profiles typically secure financing at the lower end of these ranges, while those trading with emerging markets or having shorter operating histories pay premium rates reflecting higher perceived risk.

How does credit insurance protect your import/export business?

Trade credit insurance protects import/export companies against the financial loss when overseas buyers fail to pay due to insolvency, protracted default, or political events that prevent payment.

Commercial risk coverage protects your import/export company when a buyer becomes insolvent, enters bankruptcy, or fails to pay within a specified period (typically 60-180 days past due). Credit insurers typically cover 75-95% of the invoice value, meaning your company absorbs 5-25% as a deductible to maintain incentive for careful buyer selection.

Political risk insurance covers losses from government actions in the buyer's country that prevent payment—including expropriation, currency inconvertibility, war, civil unrest, or government interference with contracts. This protection proves especially valuable for import/export companies trading with countries experiencing political instability or currency controls.

Credit insurance enables your import/export company to access better financing terms from banks and factors. Lenders view insured receivables as significantly less risky, often advancing 85-95% of invoice value versus 70-80% for uninsured receivables. This directly improves your working capital position and reduces financing costs by 1-3 percentage points.

Bank guarantees work differently—they're issued by a bank on behalf of your company or your trading partner to secure contractual obligations. If your import/export company fails to meet contract terms, the beneficiary can claim against the guarantee. Conversely, demanding a bank guarantee from your buyer provides recourse if they fail to perform, protecting your business from contract breaches in international trade.

This is one of the strategies explained in our import/export company business plan.

What determines how much financing your import/export company can get?

The maximum financing amount available to your import/export company depends on multiple factors that lenders evaluate to assess risk and establish appropriate credit limits.

Your company's annual revenue sets the baseline—most trade financiers limit exposure to 10-30% of your annual turnover for working capital facilities. If your import/export company generates $2 million annually, expect maximum facilities of $200,000-600,000 across all financing products combined, though specific transactions may push higher with strong collateral.

Individual transaction size matters significantly. Lenders typically advance 70-90% of the invoice or purchase order value, with the percentage varying based on buyer creditworthiness and product type. High-value capital equipment exports might secure 85-90% financing, while consumer goods with volatile pricing might only qualify for 60-75% advance rates.

Collateral value directly impacts limits—if you're pledging inventory, receivables, or real estate, lenders will advance against the liquidation value (typically 50-80% of market value) rather than book value. Import/export companies with strong tangible assets secure substantially higher credit lines than those with primarily intangible assets.

Your buyer's creditworthiness plays a crucial role when the financing is non-recourse (lender assumes buyer default risk). Transactions with investment-grade corporate buyers or buyers in developed markets qualify for higher advance rates than those involving small companies or emerging market buyers where risk is elevated.

Country and political risk assessments affect limits for cross-border transactions. Import/export companies trading with countries that have stable governments, convertible currencies, and strong legal systems access higher financing multiples than those dealing with sanctioned nations, currency-restricted markets, or politically unstable regions.

Your trading history and relationship with the lender influence limits over time—import/export companies with 3-5 years of successful transaction history and timely repayments typically see credit limits increase 20-50% as the banking relationship matures.

How can you improve your chances of getting approved for trade financing?

1. Maintain pristine financial records and positive cash flow: Import/export companies should have audited or reviewed financial statements prepared by certified accountants showing consistent profitability over 2-3 years. Demonstrate positive operating cash flow of at least 1.2x debt service requirements. Clean up any outstanding tax liabilities or legal judgments before applying—these red flags immediately reduce approval chances by 40-60%.
2. Build and document your trading track record: Compile a portfolio of successfully completed transactions with reputable buyers and suppliers. Maintain reference letters from 3-5 satisfied trading partners, bank references confirming timely payments, and detailed records showing order fulfillment rates above 95%. Import/export companies with documented transaction histories of 20+ successful shipments see approval rates increase by 35-50%.
3. Secure credit insurance on your receivables: Obtaining trade credit insurance coverage demonstrates to lenders that an independent underwriter has vetted your buyers and found them creditworthy. Insured receivables reduce lender risk by 70-80%, often resulting in 15-25% higher advance rates and 2-3 percentage points lower interest rates for your import/export financing.
4. Provide strong collateral or guarantees: Offer tangible security such as real estate, equipment, inventory with stable values, or cash deposits that lenders can easily liquidate. Personal guarantees from owners with strong personal credit (scores above 700) increase approval probability by 25-40% for smaller import/export companies. Consider securing a standby letter of credit or bank guarantee from a reputable financial institution to strengthen your application.
5. Work with reputable, creditworthy trading partners: Conduct thorough due diligence on buyers and suppliers—obtain credit reports, financial statements, and references before structuring deals. Lenders view transactions with Fortune 1000 companies, government entities, or well-established firms as 60-70% less risky than deals with unknown counterparties. Focusing on buyers in developed markets with stable banking systems improves approval odds by 30-45%.
6. Demonstrate industry expertise and management competence: Highlight your management team's experience in international trade, including years working in import/export, language capabilities, and understanding of specific product markets. Companies led by executives with 10+ years of trade experience and industry certifications receive 25-35% more favorable terms than those with novice management.
7. Address any previous defaults or payment issues head-on: If your import/export company has past late payments or defaults, prepare detailed explanations showing they were isolated incidents, describe corrective actions taken, and demonstrate improved payment performance over the subsequent 12-24 months. Transparency about past issues with clear evidence of resolution improves approval chances versus hiding problems that lenders will discover during due diligence.

What compliance requirements must import/export companies meet?

Import/export companies must navigate complex regulatory frameworks covering anti-money laundering, sanctions compliance, customs requirements, and banking regulations across multiple jurisdictions.

Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance requires financial institutions to verify the identity of your import/export company, beneficial owners (anyone owning 25%+ equity), directors, and authorized signatories. You'll provide government-issued identification, proof of address, corporate registry documents, and detailed information about your business activities, trading partners, and source of funds. Expect this verification process to take 1-3 weeks for first-time applicants.

Sanctions screening is mandatory—banks must verify that your import/export company, your trading partners, and all transaction parties are not on sanctions lists maintained by the UN, US OFAC (Office of Foreign Assets Control), EU, UK, or other relevant authorities. Transactions involving sanctioned countries (currently including North Korea, Iran, Syria, and parts of Russia) will be rejected immediately. Your company must implement its own sanctions screening procedures to avoid blocked transactions.

Customs documentation compliance requires that all shipping documents accurately reflect the goods being traded—false declarations, undervaluation, or misclassification of goods can result in criminal prosecution, not just denied financing. Import/export companies must maintain detailed records of all international transactions for 5-7 years as required by most jurisdictions' customs authorities.

Export control regulations restrict certain goods, technologies, and software from being exported to specific countries or entities. If your import/export company deals in dual-use goods (civilian and military applications), encryption technology, or sensitive materials, you must obtain export licenses and demonstrate compliance with regulations like the US Export Administration Regulations (EAR) or EU Dual-Use Regulation.

Tax compliance across jurisdictions affects your financing approval—import/export companies must demonstrate they're current on all tax obligations in their home country and understand VAT, customs duties, and transfer pricing obligations in destination markets. Transfer pricing documentation becomes critical when trading between related entities in different countries.

We cover this exact topic in the import/export company business plan.

How do fintech platforms compare to traditional banks for trade finance?

Fintech platforms and alternative lenders have emerged as significant players in trade finance, offering import/export companies faster decisions and more flexible terms than traditional banks, though typically at higher costs.

Import/export companies increasingly use a hybrid approach—maintaining traditional banking relationships for large, complex transactions and letters of credit while leveraging fintech platforms for quick-turnaround working capital needs and invoice financing on smaller deals.

What steps should you take to apply for trade financing?

Import/export companies should follow a systematic approach to prepare and submit trade finance applications that maximize approval speed and success rates.

Step 1: Organize corporate documentation (Week 1-2). Compile your business registration certificate, articles of incorporation, current business licenses, and tax identification numbers. Gather financial statements (balance sheet, P&L, cash flow) for the past 2-3 years—audited statements significantly strengthen applications for larger facilities. Prepare a current receivables aging report and payables schedule to demonstrate working capital management in your import/export operations.

Step 2: Assemble transaction-specific documents (Week 2-3). Collect all contracts, purchase orders, or sales agreements with your trading partners showing clear terms, quantities, pricing, and delivery schedules. Prepare proforma invoices detailing the goods, incoterms, and payment terms. Obtain your buyers' or suppliers' business profiles, including company registration, financial statements if available, and credit reports from agencies like Dun & Bradstreet or Coface. For shipments in progress, gather bills of lading, packing lists, and insurance certificates.

Step 3: Develop your business case (Week 3-4). Write a detailed narrative explaining your import/export transaction: what you're buying or selling, who your counterparties are, why this deal makes business sense, and how you'll repay the financing. Include cash flow projections showing how the transaction generates sufficient margin to cover financing costs plus profit. Address any risk factors proactively—country risks, product market risks, or buyer concentration issues—and explain your mitigation strategies.

Step 4: Select the appropriate financing product (Week 4). Match your needs to the right instrument—letters of credit for payment security, invoice factoring for immediate liquidity post-shipment, purchase order financing for large orders exceeding your capital, or trade loans for general working capital. Consider whether you need recourse (you repay if buyer defaults) or non-recourse (lender assumes buyer risk) financing based on your risk tolerance and buyer creditworthiness in international transactions.

Step 5: Identify and approach suitable lenders (Week 4-5). Research banks active in trade finance for your specific markets and product categories—not all banks finance all countries or commodities. Consider whether fintech platforms or alternative lenders better match your timeline and profile. For complex transactions above $500,000, consider engaging trade finance brokers or advisors who maintain relationships with multiple lenders and can negotiate better terms for your import/export company.

Step 6: Submit complete, error-free applications (Week 5-6). Double-check all documents for accuracy, consistency, and completeness—missing information delays approvals by 2-4 weeks on average. Ensure financial figures match across all documents and that dates, names, and amounts are consistent throughout. Submit applications to 2-3 lenders simultaneously to compare terms and maintain leverage during negotiations.

Step 7: Respond promptly to due diligence queries (Week 6-8). Banks and lenders will verify information and request clarifications—response time directly impacts your approval timeline. Provide additional documentation within 24-48 hours of requests. Be prepared for site visits, buyer verification calls, or requests for supplementary information about your import/export operations. Maintain professional, responsive communication throughout the underwriting process.

Step 8: Negotiate terms and close (Week 8-10). Review offers carefully, comparing not just interest rates but also fees, advance rates, repayment terms, and covenants. Negotiate where possible—advance rates often have 5-10% flexibility, and established import/export companies can often reduce fees by 0.25-0.5%. Once satisfied, execute facility agreements, security documents, and any required guarantees to establish your trade finance relationship.

Conclusion

Securing trade financing is a critical capability for any import/export company seeking to scale operations, manage cash flow, and mitigate payment risks in international commerce.

By understanding the eligibility requirements, available financing instruments, documentation needs, and application processes outlined in this guide, you can position your import/export business to access the working capital necessary for growth while protecting against cross-border transaction risks.

This article is for informational purposes only and should not be considered financial advice. Readers are encouraged to consult with a qualified professional before making any investment decisions. We accept no liability for any actions taken based on the information provided.