Trade and import finance — paying an overseas supplier before your customer pays you

An importing business pays its overseas supplier before or at shipment, then waits — commonly 30 to 90 days — to be paid by its own customer. Letters of credit, payment against documents, and dedicated import finance lines each solve a different piece of that gap, and pairing trade finance with invoice finance lets one facility repay the other as the cycle completes. New Zealand Export Credit sits on the opposite side of the trade entirely — its guarantees are built for exporters and their foreign buyers, not for a business bringing stock in.

Key Takeaways

The structural problem

The timing mismatch is built into how cross-border trade works, not a symptom of poor cash management. "My customers take 30 to 90 days to pay" is the plain framing of the core issue, sitting on top of a payment obligation running the other way — an importer specifically has to "bridge the gap in cash flow caused by sent deliveries prior to your customer settling their bill," on that same 30-to-90 day cycle. You've paid the supplier, received and moved the goods, and only then does the clock start on getting paid yourself.

Trade finance isn't technically a loan — but it isn't free either

One lender frames it directly: "A typical Trade Finance arrangement is a short to mid-term funding solution that allows both the buyer and supplier to conclude a transaction without suffering cash flow shortages" — explicitly not a loan by that framing. That distinction shouldn't be read as "no cost," though. Costs typically include "interest on loans, fees for services such as Letters of Credit, and charges for other financial instruments" used to facilitate the transaction, varying by facility type and term — get the specific all-in cost confirmed in writing rather than assuming the label means it's cheap.

For scale: the World Trade Organisation is cited as finding that 90% of world trade depends on some form of trade finance to actually happen.

How a letter of credit actually protects both sides

A letter of credit is issued by a third-party financier, guaranteeing payment on specific conditions — the buyer gets assurance the goods are being manufactured and delivered before payment is released, and the seller gets assurance the money will follow once the goods are provided. It's framed elsewhere as reducing risk for both supplier and buyer by guaranteeing payment, with conditions that can be tied to when goods are shipped or when the buyer receives them. For the buyer specifically, it provides reassurance goods will be manufactured and shipped on time before payment releases to the supplier; for the seller, it ensures prompt payment without waiting for the buyer to actually receive delivery. Neither side is trusting the other directly — both are trusting the financier standing in the middle.

Documents against payments, and telegraphic transfer

Documents Against Payments works differently: the supplier receives payment in exchange for handing over the shipping documents themselves — protecting the supplier by making funds available, and protecting the buyer because those documents prove the goods have genuinely shipped before money moves. In practice, that typically means a document such as a bill of lading, supplied to the party facilitating the transaction, which after verification allows payment to be transferred.

A telegraphic transfer is simpler again — an electronic transfer of funds, widely used specifically because many suppliers require an advance payment before manufacturing, particularly "during the establishment period of a trading relationship" where trust hasn't been built up yet.

Import finance as a line of credit — and why the published terms don't agree

Import finance itself is described as a trade finance solution for buying goods from overseas suppliers — where funds can't be accessed independently, the facility provides a line of credit for up to 180 days. Worth being careful with the exact figure you're quoted, though, because related products on the same lender's own site don't line up. A "Payment in Advance" facility — a revolving line of credit specifically to ensure the supplier receives a required down payment — is described as generally lasting up to 120 days. A separate, general Trade Finance product page states funding "for up to 150 days and up to 100% of the order value." Three different maximum tenors — 120, 150 and 180 days — across products that all sit under the same trade finance umbrella. Confirm the actual term that applies to your specific facility directly rather than assuming any one of these figures is the standard.

Combining trade finance with invoice finance — the self-repaying loop

This is the mechanic that actually closes the gap end to end. One lender lays it out as a five-step cycle:

1. Use trade finance to pay your supplier when they ship the goods to you.
2. Receive the goods and clear customs.
3. Invoice your own customer for the goods once sold or delivered.
4. Submit that invoice for invoice finance, before your customer has actually paid it.
5. Use the invoice finance advance to repay the trade finance facility once it's due.

In the specific context of using this structure for imports, the invoice finance leg is described as releasing up to 85% of the invoice's value before your own customer pays. That figure doesn't match what the same lender's main Invoice Finance page and FAQ state elsewhere — "the advance rate is up to 80% of eligible invoice value," illustrated with a $100,000 example: submit $100,000 in eligible invoices, and you may be able to access up to $80,000 sooner. Two different headline percentages, same lender, depending on which page you're reading. Treat either figure as a ceiling to confirm for your specific application, not a fixed number to build a cash flow forecast around.

What a funder wants to see before opening a trade line

Eligibility for the invoice finance leg of this structure runs along familiar lines: B2B trade-credit sales, at least six months' trading history with consistent invoicing and collections, creditworthy New Zealand business debtors, at least $10,000 a month in invoices, and New Zealand registration and operations.

On the risk side specifically: finance companies typically conduct "thorough due diligence on the supplier's track record," and may require Documents Against Payments before transferring funds — protecting the buyer's side of a relationship with a supplier that doesn't yet have a track record on file.

Currency, other risk, and what it costs

Some trade finance is offered in NZD, USD, "or almost any currency," pitched specifically as flexibility to trade globally without financial barriers — worth checking for if your supply chain runs through a currency you don't otherwise deal in. Beyond the buyer-supplier payment risk itself, foreign exchange fluctuations, geopolitical tensions, and international sanctions are all named as additional factors that can disrupt an otherwise straightforward trade transaction.

On speed: trade finance approval can come through in as little as 24 hours, subject to the terms of the specific credit arrangement, and invoice finance funds can similarly be available within 24 hours of approval — a genuinely fast turnaround relative to a conventional bank facility, though the actual number depends on your file and the lender's process.

What New Zealand Export Credit does for exporters

This is worth being precise about, because it sits on the opposite side of the trade cycle from everything above. New Zealand Export Credit's core offer is "providing trade insurance cover and financial guarantees that cover any risks you might come across when you do business internationally" — but specifically as an exporter. Its support includes:

• Short-term trade insurance and longer-term export credit insurance, covering the risk of a foreign buyer not paying.
• Loan guarantees and contract bond guarantees for buyers, plus support for domestic key suppliers involved in an export deal.
• An export credit guarantee, covering credits or loans of more than one year provided to a foreign buyer — covering the risk of that buyer or a foreign bank failing to repay.
• A loan guarantee, giving a bank security so it's willing to lend the exporter additional finance specifically to fund export contracts.
• A short-term trade credit product, covering the risk of a foreign buyer or foreign bank failing to make short-term credit payments, provided either directly or as top-up cover to existing insurance.
• A surety bond guarantee, aimed specifically at smaller exporters who can't obtain surety bonds from offshore issuers on their own — this one is narrow but specific: it works through indemnity arrangements that can enable access to bonds required for federally or state-funded projects in the United States, Canada, Puerto Rico, or the US Pacific Territories.

To qualify, a business has to be New Zealand registered, or an international subsidiary of a New Zealand company, and has to show the transaction is commercially sound and genuinely benefits New Zealand.

If your business is bringing stock into New Zealand rather than sending it out, none of this applies to your side of the transaction. NZEC's products are built specifically around New Zealand exporters and the foreign buyers on the other end of an export sale — an importer paying an overseas supplier sits outside that framework entirely. Import finance lines, letters of credit, documents against payments, and invoice finance are the tools actually built for that direction of trade.

Frequently Asked Questions

Is trade finance the same thing as a business loan? Not by how it's typically framed — it's described as a short-to-mid-term funding solution rather than a loan, structured around a specific transaction. It still carries real costs, including interest and fees for instruments like letters of credit, so treat it as genuine credit rather than a free facility.

What's the actual difference between a letter of credit and payment against documents? A letter of credit is a payment guarantee issued by a third-party financier, released once agreed conditions are met. Payment against documents is more direct: the supplier hands over shipping documents in exchange for payment, without a separate guarantee instrument sitting between the two parties.

How do trade finance and invoice finance actually work together? Trade finance pays your supplier when goods ship; once you've invoiced your own customer for that stock, you submit the invoice for invoice finance and use that advance to repay the trade finance facility. Used in sequence, the two facilities bridge the full gap from paying the supplier to being paid by your customer.

Does New Zealand Export Credit help importers too? No — its guarantees and insurance are built specifically for New Zealand exporters and their foreign buyers, not for a business importing goods. An importing business should look at import finance lines, letters of credit and invoice finance instead.

What term should I expect on an import finance facility? Don't anchor on one number — published maximum terms for related products range from 120 to 180 days depending on the specific facility and lender page. Get the actual term for your own application confirmed in writing before you build a cash flow plan around it.

Deplexifi arranges trade and import finance across New Zealand, Australia and the UK, and can tell you which structure actually closes your specific supplier-to-customer gap before you apply anywhere.

Assuming New Zealand Export Credit's guarantees and insurance apply to importing. They're built specifically for New Zealand exporters and their foreign buyers, not for a business bringing stock into New Zealand.

Nothing here is regulated financial advice. Deplexifi arranges commercial finance for businesses — this article describes general lending practice and the published position of the sources listed below, not a recommendation for any individual business.