Working Capital and Trade Finance across borders
Trends in CORPORATE FINANCE
In a globalized economy, companies are increasingly faced with the challenge of securing their liquidity and trade financing across national borders. Such transactions involve risks such as currency fluctuations, regulatory uncertainties and long payment terms. Nevertheless, innovative approaches and technologies have proven successful in overcoming these hurdles and giving companies a competitive advantage.
Digital Platforms and Blockchain: Efficiency and Transparency
Digital platforms have proven to be a gamechanger for working capital and trade finance. Providers such as Kyriba, SAP Ariba or C2FO offer solutions to optimize payment processes and supply chain financing. They allow companies to flexibly design payment terms while maximizing their liquidity.
A particularly innovative approach in this area is the use of blockchain technology. Platforms like we.trade – which is built on the Linux Foundation’s Hyperledger Fabric and runs on IBM’s Blockchain Platform – use blockchain to make transactions more transparent and secure.
Contracts and payments are processed automatically via smart contracts, reducing risks such as fraud or non-payment. Real-time visibility also increases trust between trading partners.
Supply Chain Finance: Strengthening Partnerships
Supply chain finance (SCF) has established itself as an effective tool for optimising payment flows within global supply chains.
Major banks such as HSBC and Citibank offer SCF programs, where suppliers receive early payments while buyers can maintain their payment terms.
Such solutions not only strengthen the relationships between companies and their suppliers, but also help smaller suppliers, who often struggle to obtain bank financing on attractive terms.
By having their invoices discounted early, they can free up liquidity and develop their business sustainably.
Local expertise and regulatory compliance
Cross-border trade finance requires in-depth knowledge of local regulations and cultural differences. Partnerships with local banks and financial service providers have proven their worth here. They bring the necessary know-how to circumvent regulatory hurdles while facilitating access to local markets. In addition, compliance is a decisive factor. International frameworks such as the Incoterms or the guidelines of the International Chamber of Commerce (ICC) ensure uniform standards. Companies that comply with these standards can minimize risks and benefit from a smoother process.
Factoring and forfaiting: alternatives for liquidity
Factoring and forfaiting are other proven solutions to optimize working capital. With factoring, companies sell their receivables to a financial service provider and receive immediate liquidity. This is particularly attractive for SMEs, which often suffer from long payment terms. Forfaiting, on the other hand, is suitable for larger cross-border transactions where exporters are relieved of the risk of default by selling long-term receivables.
Mixture of technology and partnerships
Optimising working capital and trade finance across national borders requires a strategic mix of technological solutions, financial instruments and local know-how. Digital platforms and blockchain increase efficiency and security, while supply chain finance, factoring and forfaiting provide short-term liquidity.