What is trade finance? How importers and exporters get paid safely
By SendPay Business · · 2 min read
Trade finance is the set of tools that helps buyers and sellers in different countries trade safely. The seller wants to be paid before goods leave, and the buyer wants the goods before paying. Trade finance puts a bank or other party in the middle to bridge that gap.
The main tools
- Letter of credit: the buyer's bank promises to pay once the seller shows the right documents.
- Documentary collection: banks swap shipping documents for payment, without a bank guarantee.
- Invoice finance: a lender advances money against unpaid invoices.
- Export credit: government-backed support, such as UK Export Finance in the UK.
Which to use
Letters of credit give the most protection but cost the most and take paperwork. Documentary collections are cheaper but riskier for the seller. Many established trading partners simply use open account terms, where the buyer pays by bank transfer after delivery.
Where SendPay fits
SendPay platforms include GBP, EUR and USD accounts, international transfers and invoicing under your own brand, powered by licensed partners. SendPay does not offer lending, letters of credit or trade finance.
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Build my platform →Questions people ask
What does a letter of credit cost?
Add up the fees on a letter of credit for an order.
Letter of credit cost calculator →What is an escrow account?
A third party holds money until both sides deliver.
What is an escrow account? →Read next
This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. PayPal, Patreon and Substack are named as reference points only and are not affiliated with SendPay Business.