In its annual trade finance survey for 2016, the International Chamber of Commerce identified several areas of concern related to the state of the industry. Specifically, small-to-medium sized businesses (SMBs) have a particularly difficult time finding capital for growth, as do organizations in certain geographic locations, like Africa. As noted in the survey, there was a 9% decline in the number of banks reporting an increase in trade finance activity for 2016, suggesting a slowing of trade finance at a time when the opposite is needed. Furthermore, smaller businesses were nearly twice as likely to get rejected for trade finance (58%) as were their large company counterparts (33%). As we look ahead to 2017, what lessons can we apply?
Allowing smaller enterprises to release capital trapped in their supply chain is key. Mid-market companies with revenues ranging from $50M to $1B, which includes many family-owned and private enterprises, often have difficulty accessing capital due to not being large enough to have an established track record, yet are too large for traditional small business loans. In many ways it is these companies really feeling the squeeze, as it’s often harder for them to obtain trade finance than those who are either larger or smaller, yet they are critical to growing the overall economy and the local communities where they’re based. TradeRocket’s primary mission is to help companies who find themselves in this position.
Increasingly, CFOs are being asked to grapple with technology and change management, demands to further reduce overhead, and strengthening their company’s capital position. These pressures, coupled with balancing day-to-day priorities related to managing teams, has made the position tougher than ever. TradeRocket’s working capital marketplace aims to help CFOs unlock their supply chain, while the platform can also bring much needed digitization to the finance function with features like AP automation and electronic invoicing. With everything in the cloud, all of this can be accomplished with minimal client-side IT support required.
Much of the first wave of financial technology, or “fintech”, really grew up in consumer-side finance after the financial crisis of 2008, as evidenced by the rapid growth of peer-to-peer entities such as Lending Club and Prosper in that time period. Commercial finance is the next frontier, leveraging technology to solve working capital problems, without being defined by the technology itself, or getting dragged into resource-crippling projects that have become the hallmark of many ERP implementations. Furthermore, newer technologies like blockchain can and should be exploited to further areas such as trade finance, again expanding its reach and scale to more and more companies that desperately need it.
Regardless of how each of the above plays out in 2017, now is an exciting time for trade finance. We look forward to addressing the many challenges head-on, and continuing to help companies critical to a global economy leverage technology to meet changing market conditions and growth demands. We hope you’ll come along for the ride.