Trade Finance UK: Letters of Credit & PO Finance
By Joshua Giles, Founder and Director · Reviewed by the CoreFi credit team
Last updated 20 July 2026
CoreFi is a broker, not a lender. We do not set rates and lenders make all credit decisions.
In short: Trade finance funds the gap between paying an overseas supplier and getting paid by your customer. It covers letters of credit, supplier payment guarantees, import loans and purchase-order finance, sized to the transaction rather than a fixed overdraft. Terms typically run 30 to 180 days per shipment. We are a broker, not a lender: we place your case with specialist trade finance houses and the lender decides.
Trade finance solves a timing problem, not a solvency one. You have won the order. Your supplier abroad wants paying on or before shipment. Your customer will not pay you until 30, 60 or 90 days after they receive the goods. In between sits a cash gap that a standard overdraft was never built to carry, and it can run to six figures on a single container.
The product is really a family of instruments, each doing a slightly different job. A letter of credit is a bank's conditional promise to pay your supplier once they present shipping documents that match the agreed terms: the bill of lading, commercial invoice and packing list. The supplier ships because the bank has committed, not because they are trusting your word. Purchase-order finance advances against a confirmed order so you can pay the supplier before the goods even exist. Supplier or supply-chain finance lets you extend your own payment terms while the supplier still gets paid early. Import loans release cash against a confirmed invoice for the transit period. Most facilities are sized to the transaction, drawn per shipment and repaid when your customer settles, rather than being a fixed line you draw down slowly.
The lenders who do this properly are rarely the high street clearing banks. They are specialist trade finance houses and challenger banks with an actual trade desk, and they underwrite the trade itself: the strength of your purchase orders, your track record with the supplier, the buyer's covenant and the quality of the documentation. A property charge is usually not the point.
Trade finance also stacks. It funds the import leg, invoice finance funds the receivable behind it, and stock finance covers the goods once they sit in your warehouse. Run them together and you have working capital cover from purchase order through to cash in the bank. We are a broker, not a lender, so we cannot promise you a rate or an approval. What we do is take your transaction to the trade desks whose appetite actually fits it, rather than watching it die on a generic bank credit screen.
Key Benefits
- A letter of credit means your money does not move until the goods do: the bank only pays your supplier when the shipping documents match, which takes counterparty risk off both sides of the deal
- Facilities are sized to each transaction and repaid when your customer pays, typically 30 to 180 days, so you are not carrying a term loan for a gap that clears every couple of months
- Lenders underwrite the trade, your purchase orders, your supplier track record and the buyer's covenant, so a business holding stock but light on net assets can still get funded
- Purchase-order finance can pay a supplier before the goods are even produced, which lets you accept an order larger than your current cash position would otherwise allow
- Trade finance stacks with invoice and stock finance, giving you cover from the moment you place an order through to the day your customer's payment lands
Frequently Asked Questions
How is trade finance different from an overdraft or business loan?
An overdraft or term loan gives you a pot of cash to use however you like, and the lender underwrites your whole business to provide it. Trade finance is tied to a specific transaction: the lender pays your supplier against a confirmed order or a letter of credit, and repayment comes from the customer who buys the goods. Because the facility self-liquidates on each deal, lenders can often support a trade that a general working capital line would not stretch to.
What is a letter of credit and how does it work?
A letter of credit is a bank's written promise to pay your supplier once they present shipping documents that match the agreed terms, usually the bill of lading, commercial invoice, packing list and any certificate of origin. The supplier ships because the bank has guaranteed payment, and you settle with the bank rather than sending money to a counterparty you may never have met. It removes non-shipment risk from your side and non-payment risk from theirs.
Can I use trade finance to pay UK suppliers?
Trade finance is built around cross-border trade and the document flows that come with international shipping, so it fits import and export purchases best. For paying UK suppliers, supply chain finance or stock finance is usually the better tool. If you are not sure which one applies, that is exactly the conversation to have before you approach a lender, and we will point you to the right product rather than force the deal into trade finance.
What does a trade finance lender need to see?
Typically the purchase order or proforma invoice, the agreed Incoterms, the shipping documents once goods move, and some background on both your supplier relationship and your end customer. A new facility will also need your recent accounts and management information. Getting the documentation right matters, because a mismatch between the paperwork and the letter of credit terms is the most common cause of a delayed drawdown.
Can I combine trade finance with invoice or stock finance?
Yes, and it is one of the most effective structures we place. Trade finance funds the purchase leg, stock finance covers the goods while they sit in your warehouse, and invoice finance advances against the receivable once you have sold them. Between them you get working capital cover across the whole cycle. They often sit with different lenders, which is worth knowing at the outset, and as a broker we cannot promise the same lender will provide all three.
Related Funding Options
Trade Finance for Manufacturers
UK manufacturers paying overseas suppliers before finished goods sell can use trade finance for manufacturers to bridge the gap. We place transactions from £25k to £5M with lenders who understand manufacturing lead times.
Trade Finance for Wholesalers
UK wholesale distributors pay overseas suppliers on shipment but collect from customers 60 to 120 days later. We place trade finance that funds the purchase order and recovers when you get paid.
Trade Finance for Import & Export Businesses
Letters of credit, import finance, and supplier guarantees for UK businesses trading internationally. As a broker we place trade finance from £50k with specialist banks and trade finance houses, not the high street.
Stock Finance UK: Inventory-Backed Working Capital
Stock finance advances 50 to 70% against inventory at cost, revolving as you sell and restock. We place these facilities for UK limited companies, from £25k.
Invoice Finance UK: Fund Your Sales Ledger, Not Your Property
Invoice finance advances up to 90% of an unpaid invoice, often within a day of raising it. We place factoring & discounting facilities for UK limited companies across most sectors, with no property charge required.
Business finance by location
Lender appetite varies by city and region. If you would rather start from where your business is based, these local guides cover the same funding with the local picture.
Researching Trade Finance? Get the free guide
Plain-English, UK-specific. What it costs, who qualifies, and how to get the best terms, straight to your inbox.
- How trade finance works and what it really costs
- Eligibility and the documents lenders ask for
- How CoreFi matches you to the right lenders from our panel
Ready to Get Funded?
Submit your details and we'll match you with the right lenders from our panel. No obligation, no fees.
Get matched with lendersCoreFi is a trading name of JG Core Ltd (Company #16218779, England & Wales). CoreFi acts as a commercial finance broker and does not provide regulated financial advice. All products described are unregulated business-to-business finance. Information on this page is for general guidance only and does not constitute a formal offer of finance. Terms, rates, and availability are subject to lender criteria and may change without notice.