Types of trade finance

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What is trade finance?

The term 'trade finance' is used to cover a number of different forms of financing and methods of payment, from secured syndicated financings to letters of credit. Broadly speaking, trade finance is used by buyers and sellers of goods internationally to provide credit support for the different stages of the sourcing, production and sale of commodities.

The term ‘trade finance’ covers structured and unstructured transactions.

Unstructured trade finance

Unstructured trade finance is typically a way of financing trade (usually to assist with a borrower’s capital management), but without a secured loan facility. For more information, see Practice Note: Introductory guide to unstructured trade finance.

Structured trade finance

Structured transactions are where a borrower (usually a producer or seller of goods) receives a loan to finance the production/processing of the goods, or for cash flow purposes. This loan has some form(s) of security and structure

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