Understanding Trade Finance
Trade finance bridges the gap between the moment goods are shipped and the moment payment is received. It is the engine of global commerce — and Dorax has been structuring it for over three decades.
What is Trade Finance?
Trade finance refers to the financial instruments and products used by companies to facilitate international trade and commerce. It encompasses a broad range of mechanisms — from Letters of Credit and Bank Guarantees to supply chain finance and export credit — that reduce the risks inherent in cross-border transactions.
At its core, trade finance solves a fundamental problem: the seller wants to be paid before shipping, while the buyer wants to receive goods before paying. Financial instruments issued by trusted institutions like Dorax bridge this gap, providing payment guarantees that allow trade to flow.
The World Trade Organization estimates that 80–90% of global trade relies on some form of trade finance. Without it, the $32 trillion global trade economy would grind to a halt.
The Trade Cycle Funding Gap
Understanding where the funding gap occurs in a typical trade transaction — and how Dorax fills it.
Purchase Order Issued
Buyer places an order with the seller. Agreement on price, quantity, and delivery terms.
⚠ Funding Gap
Seller needs capital to produce/procure goods. Buyer hasn't paid yet. This is where trade finance steps in.
Trade Finance Instrument Issued
LC, SBLC, or BG issued by Dorax, guaranteeing payment to seller and protecting buyer's interests.
Goods Shipped
Seller ships goods and presents compliant shipping documents to the bank.
Payment Settled
Bank verifies documents and releases payment. Transaction complete.
Why Businesses Choose Trade Finance Over Traditional Banking
Which Instrument Do You Need?
Trade Finance Glossary
Essential terminology for navigating international trade finance transactions.