Trade Finance for UK Importers: How It Works
Trade finance funds the gap between paying an overseas supplier and getting paid by your own customer. UK lenders offer purchase order finance, import loans and letters of credit to limited companies, LLPs and partnerships of 4+ that buy stock abroad, usually secured against the goods or the underlying sales contract rather than property.
What trade finance actually covers
Trade finance is an umbrella term for funding that bridges the payment gap in an international buy-sell transaction, most often used when a UK business orders stock from an overseas manufacturer and must pay a deposit, or in full, well before the goods arrive and are sold on.
It differs from a general business loan because the lender is funding a specific transaction, not the business as a whole. The facility is typically drawn against a confirmed purchase order or sales contract, and the lender's exposure is tied to that single deal completing rather than to the company's broader trading history.
Purchase order finance vs a letter of credit
Purchase order finance and letters of credit solve the same problem in different ways: one advances cash directly to your supplier, the other gives the supplier a bank-backed payment guarantee instead of cash upfront.
Purchase order finance sees the lender pay your supplier directly, usually 80 to 100% of the order value, once a confirmed purchase order and an end customer are in place. A letter of credit works differently: your bank guarantees payment to the supplier on presentation of shipping documents, which reassures a supplier who has never worked with you but does not itself put cash in your account. Some importers use both together, a letter of credit to open the supplier relationship, purchase order finance once volumes grow.
How much you can borrow and what it costs
Facility sizes typically run from around 20,000 pounds for a single shipment up to several million pounds for revolving import lines, with cost usually quoted as a percentage of the invoice or order value per month rather than as an APR.
Pricing commonly sits in the range of 1.5% to 4% of the funded amount per month, reflecting the transaction-specific risk and the shorter duration compared with a term loan. The exact rate depends on the supplier's track record, the margin on the onward sale, and whether the goods are pre-sold to a known buyer or going into general stock. Facilities are usually short-term by design, typically running 60 to 120 days to match the shipping and sale cycle.
Eligibility for Ltd, LLP and partnership of 4+ importers
FundBiz only routes trade finance enquiries for limited companies, LLPs and partnerships of 4 or more partners, in line with the eligibility rule that applies across every specialty product on the site.
Beyond that structural requirement, lenders in this space generally want at least one completed import cycle already on record, a purchase order or sales contract from a creditworthy buyer, and a supplier who is willing to work with a UK finance provider's payment terms. Start-up importers with no trading history can still be considered, but they will usually be asked for a personal guarantee or a pre-sold order from a strong end customer to offset the lack of track record.
Documents and typical timeline
A trade finance application moves faster than a term loan when the paperwork is ready, with most lenders able to issue an indicative offer within 3 to 5 working days of receiving a complete pack.
Expect to provide the purchase order or sales contract, supplier details and payment terms, recent management accounts, a breakdown of landed cost versus resale price, and confirmation of the end buyer where the goods are pre-sold. Drawdown against a confirmed shipment can happen within 24 to 48 hours once the facility is in place, which is the main reason repeat importers keep the line open rather than reapplying for every order.
Where the risk sits
The two risks that sink trade finance deals most often are the supplier failing to ship on time or to specification, and foreign exchange movement eroding the margin between the funded cost and the sale price.
Lenders manage supplier risk by inspecting shipping documents and, in some cases, requiring an independent inspection before releasing final payment. FX risk sits mostly with the importer: a facility priced and drawn in sterling against a dollar or euro invoice can see the effective cost move materially if the pound weakens between order and payment. Businesses with regular import volumes often pair a trade line with a forward FX contract to fix the rate at the point of order.
How trade finance compares with other options
Trade finance is usually the right tool specifically for the buy-side gap; invoice finance and asset finance solve different, adjacent problems and the three are often stacked rather than chosen as alternatives.
Invoice finance releases cash against invoices you have already issued to UK or export customers, so it addresses the sell-side of the cycle once stock has moved. Asset finance suits importers buying capital equipment rather than resaleable stock. A business bringing in a container of goods to fulfil a specific order is a better fit for purchase order finance than for a general working capital loan, because the lender can underwrite against the transaction rather than the balance sheet alone.
| Instrument | Typical use | Typical cost | Typical term |
|---|---|---|---|
| Purchase order finance | Paying an overseas supplier once a confirmed order exists | 1.5% to 4% of order value per month | 30 to 90 days |
| Letter of credit | Giving a new supplier a bank-backed payment guarantee | Bank fee plus 0.5% to 2% per quarter | Set by shipment schedule |
| Import loan | General funding for landed cost of imported stock | 1% to 3% per month or annualised rate | 60 to 120 days |
| Trade finance revolving line | Repeat importers with regular shipment cycles | Priced per drawdown, similar to purchase order finance | Revolving, drawn per shipment |
Step-by-step
- Confirm eligibility: limited company, LLP or partnership of 4 or more
- Secure a purchase order or signed sales contract from your buyer
- Gather supplier details, landed cost breakdown and recent management accounts
- Submit the application pack for an indicative offer, typically 3 to 5 working days
- Agree terms and have the lender pay the supplier or issue the letter of credit
- Repay the facility once the goods are sold and your customer has paid
Example
A homeware importer in Leeds, trading as a limited company for three years, won a large order from a UK retailer but needed to pay a Vietnamese manufacturer 60% upfront. A purchase order finance lender advanced the deposit directly to the supplier against the signed retailer contract. The facility was repaid within 75 days once the retailer paid on delivery, at a cost of just under 3% of the funded amount per month.
Frequently asked questions
Can a sole trader use trade finance through FundBiz?
No. FundBiz only routes enquiries for limited companies, LLPs and partnerships of 4 or more partners. This keeps every product, including trade finance, outside the FCA consumer credit perimeter. Sole traders and smaller partnerships need to look elsewhere for import funding.
Do I need a UK buyer already lined up before I apply?
It helps significantly but is not always required. Purchase order finance is easiest to arrange when a confirmed sales contract or purchase order from your own customer already exists, since the lender underwrites against that onward sale. Import loans without a pre-sold order are available but usually cost more and require a stronger trading history.
How is trade finance different from invoice finance?
Trade finance funds the purchase of stock before it arrives, typically paying your overseas supplier. Invoice finance releases cash against invoices you have already raised to your own customers, after the goods have been delivered. Many importers use both, trade finance to fund the buy, invoice finance to fund the sell.
What happens if the supplier does not ship on time?
This is the main risk in trade finance and lenders build safeguards around it, typically requiring shipping documents or an independent inspection before releasing final payment. If a shipment fails or is delayed, the facility terms usually set out how the advance is recovered, which is why lenders favour suppliers with an established track record.
Does the base rate affect trade finance pricing?
Less directly than a term loan. Most trade finance facilities are priced as a flat percentage of the funded transaction rather than as a margin over the Bank of England base rate, which stands at 4.50% following the last move on 18 March 2026. Some import loans do reference base rate for longer revolving lines, so it is worth checking whether a quote is transaction-priced or rate-linked.
Can trade finance cover a first-ever import order?
Some lenders will consider a first import if the end buyer is strong and creditworthy, but most want at least one completed cycle on record before offering their best terms. A first-time importer may be asked for a personal guarantee or a smaller facility size to offset the lack of trading history.
By Adam Parker, Director, Best Business Loans Ltd. Last reviewed 2026-07-26.