Trade and Import Finance: Funding the Working Capital Cycle for Australian Importers

If you import goods, you pay for them long before you're paid for them. A deposit goes to the supplier when you place the order, the balance when the goods ship, then come freight, duty and GST at the border. Only after all that do the goods reach your warehouse, get sold, and eventually turn back into cash when your customers pay.

That gap can easily run to four, five or six months. The more you grow, the more cash it swallows. Trade and import finance exists to fund that gap, so growth doesn't stall for lack of working capital.

The Importer's Cash Cycle

Here's an illustrative timeline for a business importing finished goods from Asia and selling to trade customers on 45-day terms:

In this example, the business pays its supplier around 165 days before its customer pays it. Multiply that by every order in the pipeline and it's easy to see how a profitable importer can run short of cash, especially when sales are growing.

The Main Trade Finance Tools

• Trade loans (import loans). The lender pays your supplier directly, and you repay the lender later, typically 90 to 180 days, once the goods are sold. Each loan is tied to a specific shipment, so the facility revolves as orders come and go.
• Letters of credit. Your bank promises to pay the supplier once they present documents proving the goods have shipped as agreed. The supplier gets certainty of payment, and you only pay for goods that have actually shipped. Useful with new suppliers, or where suppliers won't extend credit terms.
• Documentary collections. A cheaper, simpler alternative to a letter of credit. Banks handle the shipping documents, which are released to you only when you pay or accept a bill of exchange. Less protection than a letter of credit, but less cost and paperwork.
• Supplier deposit finance. Funding for the upfront deposit, which is often the hardest part of the cycle to fund because the goods don't exist yet.
• Inventory finance. Funding secured against stock held in the warehouse, bridging the time between arrival and sale.
• Invoice finance. Once the goods are sold, an advance against unpaid customer invoices closes the final part of the gap. Paired with a trade loan, it can fund the cycle from order to cash. See invoice finance.

Don't Forget GST and Foreign Exchange

Import GST. GST is usually payable when goods clear customs, and you then claim it back on your BAS. That's a cash flow cost of up to several months on 10% of the landed value. Eligible importers can apply to the ATO's deferred GST scheme, which moves the payment to your monthly BAS instead of the border. For a regular importer, that alone can free up meaningful working capital. Speak to your accountant or customs broker about eligibility.

Foreign exchange. Most imports are priced in US dollars or another foreign currency. A fall in the Australian dollar between order and payment can wipe out your margin. Forward exchange contracts lock in the rate when you place the order, so you know your landed cost. Many trade finance lenders offer FX alongside the facility. Make sure the contract dates line up with your supplier payments.

What Lenders Look For

• A trading track record. History with your key suppliers and customers, and evidence the goods sell through at the expected margin.
• Stock turn and margin. How quickly stock sells, and at what gross margin. Slow-moving or perishable stock is harder to fund.
• Customer quality. Sales to established retailers or trade customers are viewed more favourably than one-off sales.
• Financials and existing debt. Recent financial statements and a clear view of existing facilities. Trade finance often sits alongside a bank overdraft or term loan.
• Security. Usually a general security agreement over the business, director guarantees, and sometimes property for larger limits.

Illustrative example: an importer of building products had a bank overdraft sized for a business half its current size. Each large order drained the overdraft and left wages and rent tight. A separate trade facility funded the supplier payments shipment by shipment, repaid as the goods sold. That freed the overdraft for day-to-day costs, and orders could be placed when the supplier offered the best price, not just when cash allowed.

Bank or Specialist Lender?

Banks offer trade finance at sharp pricing for established importers with property security and solid financials. Specialist non-bank trade financiers are more flexible: they'll often fund deposits, work with newer suppliers and growing businesses, and approve faster, at a higher price. Many importers use both: a bank for core facilities and a specialist for peaks or new product lines.

How We Help

We map your actual cash cycle, from supplier terms and shipping times to stock turn and customer terms, and size the facility to fit it. Then we tender it across banks and specialist trade financiers, so you get the right limit, tenor and price. Learn more about our trade finance and working capital finance services.

Book a free, no-obligation consultation and we'll show you how much cash your import cycle is tying up and how to fund it.