Trade finance for a first import order

The situation

The following is an anonymised composite illustrating a recurring pattern, not a specific settled deal. A retailer has secured a strong domestic order for a new product line and identifies an overseas manufacturer able to supply it, but the manufacturer, having no trading history with this buyer, requires payment upfront or a letter of credit before shipping the goods.

Why it's hard

The retailer does not have the working capital to pay the full order value upfront without straining its existing operations, and it has no established credit relationship with the overseas supplier that would allow open account terms. Without some form of trade finance, the order, and the domestic sale it would enable, cannot proceed.

How it can be structured

A letter of credit issued through a trade finance facility substitutes the lender's standing for the retailer's own with the overseas supplier, giving the supplier confidence to ship on the agreed terms once shipping and quality documents are presented; the exit is the retailer selling the imported goods domestically and repaying the facility from those proceeds. Where the retailer already has confirmed domestic sales orders in hand, purchase order finance can be structured alongside the letter of credit, advancing funds against the confirmed local order to further support working capital through the import cycle. Once the goods are sold on to domestic customers on trade terms, invoice finance can fund that receivables gap in turn, completing the working capital cycle from purchase through to final sale.

Because this is a first-time relationship with the overseas supplier, the letter of credit's exact terms, including the documents required, the shipping timeline, and any inspection or certification conditions, need to be negotiated carefully to avoid a technical discrepancy holding up payment once goods are shipped, which is an area where working with a lender experienced in the specific trade lane and commodity type adds genuine value beyond simply arranging the facility. Some importers use this first transaction specifically to establish a track record with both the supplier and the financier, planning for subsequent orders to move to more favourable terms, whether a lower deposit requirement from the supplier or a larger facility limit from the lender, once the first cycle completes without issue. Currency movements between order placement and eventual payment can also affect the final landed cost, and a facility that allows the retailer to lock in an exchange rate at the outset removes one further variable from an already complex first transaction. Retailers should also confirm import duties, quarantine requirements and any product-specific compliance standards apply to the goods before committing to the order, since these sit outside the finance itself but directly affect the transaction's overall viability.

What it typically costs

Pricing on a letter of credit and associated trade finance reflects the underlying transaction, the supplier and buyer relationship, and the security or account funds held, quoted on enquiry once a lender has reviewed the trade documentation. Costs are typically structured as issuance and negotiation fees alongside a facility rate, rather than a standard term loan structure.

Timeline

1. Same day — scoping call confirming the supplier, order value and domestic sales position.
2. 3–5 business days — trade documentation review and lender matching.
3. 5–10 business days — facility approval and letter of credit issuance.
4. Ongoing — drawdown against shipping documents as the order progresses.

Questions we'd ask you

1. What is the order value, and what payment terms is the supplier requesting?
2. Do you have a confirmed domestic sales order for the goods being imported?
3. Have you traded with this supplier before, or is this a first-time relationship?
4. What security or funds do you have available to support the facility?
5. How will the imported goods be sold on — direct to consumer, wholesale, or another channel?

Related

Trade finance · Invoice finance · Importers & exporters · Letter of credit