LFP081 – Trade Finance and Supplier Finance in the Digital Age with Guy Willans COO of Trade River

London Fintech Podcast

Trade Finance is one of those less media-highlighted but vital areas of the economy – it really is the oil in the engine of international trade. It’s one of those “how hard can it be” areas where it turns out quite a lot of wrinkles make it more of a speciality field than it might be. One can presume that this is due to it being an ancient business, after all finance was needed for the silk road and all other routes and merchant banking had its origins in international trade.

TradeRiver were founded in 2011 and have provided over £100m of working capital finance to businesses in the UK. They provide UK businesses with a unsecured line of revolving trade finance to fund purchases of goods or services within 24 hours, both worldwide and in the UK. Facilities can vary from £100k up to £5million. They recently opened an office in Baltimore to serve the US market.

Being a digital player their aim is to be quick, simple and paperless (more rare than you might imagine in Trade Finance).

I am delighted to be joined today by Guy Willans, Trade River’s COO whose varied career – from Sandhurst, working around the world, an AIM listed dot-com, importing, sales and twelve years at HSBC et al certainly provide a rich enough background to discuss Trade Finance in the round and in context.

Topics discussed on the show include:

• teaching young kids to play rugby
• talking to 17 year olds about how the world of work has changed and will change
• the relevance to us all re careers of surfing, hunter gatherers and shapeshifting
• how eras of work have changed
• Guy’s career – including recruiting 10% of the Army a year (!)
• systematisation in school, companies and breaking out of being systematised
• working in small cos and large cos
• Trade River have a dozen staff in London and a sister company in the US with about five
• what is Trade Finance?
• complexities come from the fact that trade itself is complex – goods are being moved from one place to another and ideally one side would like payment in advance whilst the other would like to pay only after inspecting the goods
• Trade Finance is about bridging this gap – especially that both sides might be unsure they are doing the right thing
• over time a number of complicated ways banks have come up with to cover that risk
• main way of managing the risk is to get proof of every stage of the process, when good put on the ship get a bill of laden etc etc – a paperwork trail
• a bundle of documents which must physically move around the world, very thick manuals describing exactly how this must work
• trade finance does not cover services per se (although Trade River can) as the main security is ownership of the goods
• problems of fraud and fake goods
• Trade RIver facilitate the payment of a transaction not the transaction itself – so TR’s risk is with the buyer who has agreed to pay them later
• TR’s platform is used to connect real buyers and sellers (ie of goods)
• the problem of trade finance is the complexity and visibility of all the moving parts and information – naturally this can be helped enormously by digitalisation
• banks have long term big plans to sort this, but “this will take years”
• TR help growing business with good relationships with their suppliers
• trade finance = “providing the money that the buyer would use to pay the seller”
• supplier finance = “the buyer doesn’t need any money” – funding the seller who needs the money now to make the goods
• an example of supplier finance is where a small SME needs funds to ramp up supply to a large, credit-worthy buyer but lacks those funds
• disrupting old, sewn-up markets vs enhancing
• banks have moved up the scale spectrum leaving a gap for SME/MME trade finance deals; ditto in supplier finance where they are not interested in doing deals less than £750m turnover
• banks are supportive of this as TR fund businesses that might grow into the size the banks would fund
• TR are an unsecured provider – taking credit insurance against the buyer
• their deals are balance sheet neutral for the business borrowing from them
• TR borrow from banks to provide this finance
• businesses as a hub and spokes model with TR at the centre of many spokes
• their credit department have all had 30yrs+ experience in the sector
• TR’s use of channel partners
• client base across many sectors – manufacturing of clothes, more intangibles like online media spend; UK to UK or worldwide to UK

And much much more

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