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The international trade industry has access to a variety of financing options, including supply chain finance and trade finance. In order to free up working capital, businesses can turn to either supply chain finance or trade finance, but these two approaches differ significantly. Financing the procurement of goods from wholesalers is a common application of supply chain finance. In most cases, a buyer will secure a loan based on the value of the merchandise being purchased. The buyer is then in a better position to make necessary expenditures or to reinvest in the growth of the business. The buyer is responsible for paying back the loan, plus interest and fees, once the merchandise has been sold. However, goods sales to buyers are frequently financed through trade finance.
The seller will obtain a loan based on the anticipated sale proceeds. The seller may then be in a position to use the freed-up funds for whatever purpose they see fit, be it meeting immediate needs or making long-term investments. The seller is responsible for paying back the loan plus interest and fees once the buyer has paid for the goods. Financial tools like supply chain financing and trade financing can help companies expand their global reach. Before deciding which of these two financing options is best for your company, it is vital that you fully grasp the key distinctions between them.