Ossiano Guides
How trade finance works, step by step.
47 guides for CFOs, treasurers and exporters, in 8 areas, plus 32 instrument cards and a glossary. Every figure is sourced and linked. Guides include charts, worked examples and calculators.
01 · Start here
Three ways in, depending on where you sit
New to trade financeWhat is trade finance?Who uses it, who pays for it, and why it exists. Start with guide 1.1.Read guide 1.1
I'm sellingGet paid soonerReceivables finance, factoring, pre-export finance and forfaiting.Go to Getting paid
I'm buyingPay on longer termsPayables finance, dynamic discounting and inventory finance.Go to Paying on terms
02 · The library
47 guides in 8 areas
Choose an area to see its guides, or open the instrument library and the glossary.
01
Foundations of trade finance
What is trade finance, and who does what?
Guide 1.1What is trade finance?Trade finance is the set of bank undertakings, credit and insurance that settles the risk and timing gap between an exporter that wants payment and an importer that wants the goods.Read the guide
Guide 1.2Trade finance vs supply chain financeBoth put cash in a seller's hands earlier, but trade finance is defined by the risks of an international sale while supply chain finance is defined by the working capital tied up across a buyer's or seller's supply chain.Read the guide
Guide 1.3Who's who in a trade transactionThe names change with the instrument, from applicant and beneficiary under a letter of credit to drawee and principal under a collection, but the same roles recur in every cross-border sale.Read the guide
Guide 1.4Why global trade runs on creditBetween shipment and payment someone funds the goods, and the payment terms decide whether that is the exporter, the importer or a finance provider standing between them.Read the guide
Guide 1.5The trade finance gapThe Asian Development Bank's 2025 survey of more than 110 providers puts the gap at around 10 percent of merchandise trade flows, unchanged from its 2023 estimate.Read the guide
02
Getting paid
How do exporters get paid sooner?
Guide 2.1Receivables financeA seller sells or assigns its invoices to a finance provider, receives most of their value after verification, and receives the balance, less fees and discount, when the buyer pays.Read the guide
Guide 2.2Factoring vs invoice discountingIn factoring the finance provider usually runs the sales ledger and collects, while in invoice discounting the seller keeps the ledger and the buyer may never know the invoices were sold.Read the guide
Guide 2.3Pre-export financeA finance provider advances part of an export order's value against the assigned sales contract, the exporter produces and ships, and the importer pays the provider directly.Read the guide
Guide 2.4Pre-shipment vs post-shipment financePre-shipment finance rests on the seller's ability to perform, post-shipment finance rests on the buyer's promise to pay, and at shipment the security moves from goods in production to the receivable.Read the guide
Guide 2.5ForfaitingThe exporter sells promissory notes, bills of exchange or letter of credit obligations to a forfaiter at a discount, receives cash against documents, and has no further financial interest in the deal.Read the guide
Guide 2.6Trade credit insuranceTrade credit insurance pays an exporter most of an unpaid invoice when a foreign buyer defaults or a political event stops payment, and the policy can be assigned to a lender to support financing.Read the guide
03
Paying on terms
How do buyers pay later and keep suppliers strong?
Guide 3.1Payables financeSuppliers sell invoices the buyer has approved to a finance provider at a discount aligned with the buyer's credit risk, and since 2023 and 2024 US GAAP and IFRS buyers disclose program terms and balances every year.Read the guide
Guide 3.2Extending terms, keeping suppliers strongEvery extra day of terms comes off the buyer's cash conversion cycle, and payables finance lets the supplier turn the longer receivable into early cash priced on the buyer's credit while the buyer pays on the due date.Read the guide
Guide 3.3Supplier payment terms for importersOpen account terms of 30, 60 or 90 days let an importer receive goods before paying, and a discount for paying early is an annualized return the importer can compare with its own value of funds.Read the guide
Guide 3.4Inventory financeA finance provider advances a percentage of the value of goods held for sale, keeps title or security over them with inspections and insurance, and releases title when sale proceeds repay the advance.Read the guide
Guide 3.5Dynamic discountingThe buyer pays approved invoices early from its own cash at a discount that slides with the days left to the due date, and the US Treasury's rule for federal buyers gives a public test: accept when the discount beats the value of funds.Read the guide
Guide 3.6Distributor financeFinance providers fund distributors to hold a large manufacturer's goods for resale, secured on inventory and receivables and often supported by the manufacturer through buy-back, stop-supply or risk sharing undertakings.Read the guide
04
Payment methods
Who carries the risk under each way of paying?
Guide 4.1The payment terms spectrumCash in advance, letters of credit, documentary collections and open account differ in who carries the risk, when the seller is paid, which documents move through banks and which rules apply.Read the guide
Guide 4.2Letters of creditA letter of credit commits the buyer's bank to pay the seller once the seller presents documents that match the credit, under ICC rules that have stood since July 2007.Read the guide
Guide 4.3Open account tradeOpen account is the payment term buyers prefer and sellers carry, and its risk is managed with credit insurance, receivables finance and, where the parties choose, a bank payment obligation or a standby.Read the guide
Guide 4.4Documentary collectionsUnder URC 522 the seller's bank sends shipping documents and a draft to the buyer's bank, which releases them against payment (D/P) or acceptance of a time draft (D/A).Read the guide
Guide 4.5Standby letters of credit vs bank guaranteesBoth are independent bank undertakings that pay on a complying demand when the other side defaults; the standby usually runs under ISP98 and the demand guarantee under URDG 758.Read the guide
Guide 4.6Bills of exchange and promissory notesA bill of exchange is the seller's order to the buyer to pay; a promissory note is the buyer's own promise; both can be accepted, negotiated and discounted, and both are now recognized in electronic form in the UK.Read the guide
05
Documents and risk
What does a financier check before funding a trade?
Guide 5.1IncotermsThe eleven Incoterms 2020 rules settle delivery, risk, carriage cost and customs duties in three letters, and they leave title and payment to the sale contract.Read the guide
Guide 5.2The bill of ladingAbout 45 million bills of lading are issued each year, and whether a bill is negotiable, who holds it, and when the carrier releases cargo decide who a bank or trader can look to when goods go missing.Read the guide
Guide 5.3The trade documents checklistThe commercial invoice, transport document, certificate of origin, insurance document and export filings each answer a different question, and a bank examining them under UCP 600 has at most five banking days to decide.Read the guide
Guide 5.4Buyer, country and performance riskBuyer risk, country risk and performance risk each have their own tools, from credit insurance at 90 to 95 percent cover to OECD country classifications reviewed at least once a year.Read the guide
Guide 5.5Title and ownership in commodity tradeIncoterms settle risk and cost but leave title to the sale contract and the law behind it, so financiers rely on bills of lading, warehouse receipts and the courts' reading of both.Read the guide
Guide 5.6Know your customer in trade financeUS rules require institutions to identify beneficial owners at 25 percent, treat entities 50 percent owned by blocked persons as blocked, and control certain exports under the Commerce Department's EAR.Read the guide
06
Cost and working capital
What drives the cost, and how is cash released?
Guide 6.1How trade finance is pricedThe cost of a trade finance line comes down to a benchmark rate plus a margin, applied for the tenor on a year basis that differs by currency, with fees on top.Read the guide
Guide 6.2The cash conversion cycleDays sales outstanding plus days inventory outstanding minus days payable outstanding gives the number of days a business funds its own trade, and trade finance can shorten each term.Read the guide
Guide 6.3Tenor explainedTenor is the time from the start of a trade finance transaction to its maturity; register data put the average for short-term products between 53 and 256 days.Read the guide
Guide 6.4Working capital and trade financeOpen account terms leave sellers funding 30 to 90 days of trade, and receivables, inventory, payables and export working capital finance each release part of that cash.Read the guide
Guide 6.5Seasonal trade and working capitalCrop and export calendars set when cash goes out and when it returns, and pre-export, warehouse and annually renewed facilities are built to match that curve.Read the guide
Guide 6.6Structured commodity financeBasel 2 defines commodities finance as structured short-term lending repaid from the sale of exchange-traded commodities, secured through warehouse receipts, margins over market value and control of the proceeds.Read the guide
07
Sectors and corridors
How are specific commodities and routes financed?
Guide 7.1How LNG cargoes are financedUS LNG leaves the terminal free on board at a price built from a liquefaction fee and Henry Hub-linked feedgas, and the buyer's bank instruments, credit terms and export credit support decide how that cargo invoice is paid.Read the guide
Guide 7.2Financing agricultural commodity tradeAgricultural trade is financed against the goods themselves: warehouse receipts, pre-export advances, government-guaranteed letters of credit and development bank syndications each tie the funding to a harvest that moves on a calendar.Read the guide
Guide 7.3India to US corridor guideThe India to US corridor runs with a wide US goods deficit, an additional duty that applied from August 27, 2025 to February 7, 2026, and payment terms that range from letters of credit to open account.Read the guide
Guide 7.4US to Latin America corridor guideUS sellers into Latin America face two different corridors: Mexico, the largest US export market, with a wide US deficit, and South and Central America, where the United States exports more than it imports and export credit agencies back the capital goods.Read the guide
Guide 7.5Financing energy and coal tradeCrude, products, coal and gas move in large single cargoes, so the financing is built cargo by cargo: letters of credit for part or all of the price, open account for the rest, prepayments repaid in barrels, and inventory held by a financing counterparty.Read the guide
Guide 7.6Financing industrial goods tradeMachinery, aircraft and components take months to build and years to pay for, so industrial trade runs on supplier finance programs upstream, export credit agency terms for the buyer, and dealer inventory finance downstream.Read the guide
08
Digital trade
What is changing in trade paperwork and credit?
Guide 8.1Electronic bills of ladingAn electronic bill of lading does the legal work of the paper original only where the law recognizes control of the record, and both the law and carrier adoption moved sharply after 2021.Read the guide
Guide 8.2Fraud controls in trade financeJudgments from London and Singapore show where false documents enter a trade, what a bank's payment undertaking still requires, and which controls the rules and regulators describe.Read the guide
Guide 8.3MLETR and digital trade lawThe Model Law on Electronic Transferable Records lets an electronic record do the legal job of a bill of lading or bill of exchange; national statutes, ICC rules and US commercial law now carry it into practice at different speeds.Read the guide
Guide 8.4Data and AI in trade credit decisionsA trade credit decision weighs default risk on a short exposure; pooled default data, standard document fields and machine learning are widening what a lender can see, and the research also marks the limits.Read the guide
Guide 8.5Trade finance platformsPlatforms put the buyer's approval, the trade document and the payment on one record; this guide names only platforms that official or industry bodies list, and endorses none.Read the guide
Guide 8.6Sustainability in trade financeICC's principles and development bank programs define when a trade transaction can be called green, social or sustainability-linked, and ADB survey data show how banks weigh the question.Read the guide
Instrument library
Short reference cards for 32 trade finance instruments, grouped by what they do.
Ways to pay
Cash in advanceOpen the card
Open accountOpen the card
Documentary collection, documents against payment (D/P)Open the card
Documentary collection, documents against acceptance (D/A)Open the card
Bill of exchange and promissory noteOpen the card
Bank payment obligation (BPO)Open the card
Letters of credit and guarantees
Letter of credit (sight)Open the card
Letter of credit (usance, acceptance, deferred payment)Open the card
Confirmed letter of creditOpen the card
Transferable letter of creditOpen the card
Back-to-back letter of creditOpen the card
Red clause letter of creditOpen the card
Revolving letter of creditOpen the card
Standby letter of creditOpen the card
Demand guarantee (bank guarantee)Open the card
Getting paid
FactoringOpen the card
Invoice discountingOpen the card
ForfaitingOpen the card
Trade credit insuranceOpen the card
Paying on terms
Payables finance (approved payables, reverse factoring)Open the card
Dynamic discountingOpen the card
Distributor financeOpen the card
Funding before shipment and export credit
Pre-export financeOpen the card
Prepayment financeOpen the card
Purchase order financeOpen the card
Trade loanOpen the card
ECA-backed finance (buyer and supplier credit)Open the card
Inventory and commodity finance
Glossary
Every trade finance term used in these guides, defined in plain English, with its source where one exists.
03 · Find your instrument
Which guides fit your trade?
Figure 1 · Interactive
Guides by side and stage of the trade
Choose your side and your stage. The matching guides appear below.
Your side
Your stage
Mapping by our Research Desk. Descriptions are drawn from each guide's opening summary.
04 · Payment terms
Four ways to pay, from safest for the seller to safest for the buyer
Figure 2 · Interactive
Who carries the risk under each payment term
Tap a method to see who carries the risk and when the seller is paid.
Sources: US International Trade Administration, Trade Finance Guide, 2022 edition (July 2022), Chapters 3 to 6, and Methods of Payment page; ICC, UCP 600 and URC 522. Risk ordering from ITA; cell wording by our Research Desk.
Full guide: 4.1 The payment terms spectrum
05 · Market data
Trade is growing. Smaller firms still struggle to get it financed.
Figure 3
World merchandise trade volume, growth
Percent, year on year. 2026 and 2027 are WTO baseline forecasts.
Source: World Trade Organization, Global Trade Outlook and Statistics, March 2026. 2026 and 2027 are WTO baseline forecasts.
Figure 4
Trade finance requests rejected, by firm size
Percent of requests. 2025 survey of over 110 trade finance providers.
Source: Asian Development Bank, ADB Global Trade Finance Gap Survey, ADB Brief No. 378, December 2025.
06 · Rules and standards
The rules behind every trade, and when they changed
1933
ICC first publishes the Uniform Customs and Practice for Documentary Credits.
1936
ICC publishes the first edition of the Incoterms rules.
Jul 2007
UCP 600, the current ICC rules for documentary credits, takes effect.
Jul 2010
URDG 758, the current ICC rules for demand guarantees, takes effect.
Jul 2017
UNCITRAL adopts the Model Law on Electronic Transferable Records.
Jan 2020
Incoterms 2020, the current edition, enters into force with 11 rules.
Sep 2023
The UK Electronic Trade Documents Act 2023 comes into force.
Jan 2024
IASB supplier finance disclosure amendments to IAS 7 and IFRS 7 take effect.
Sources: ICC (UCP, Incoterms, URDG 758); UNCITRAL; legislation.gov.uk; IFRS Foundation. Orange marks digital trade milestones. Full guides: 8.3 MLETR and digital trade law; 5.1 Incoterms.
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Sources
- World Trade Organization, Global Trade Outlook and Statistics, March 2026. Supports: world merchandise exports of US$26.26 trillion in 2025 (page 2); merchandise trade volume growth for 2023 to 2025 and the 2026 and 2027 baseline forecasts (page 4).
- Asian Development Bank, ADB Global Trade Finance Gap Survey, ADB Brief No. 378, December 2025. Supports: global trade finance gap of US$2.5 trillion; trade finance rejection rates of 41% for SMEs, 40% for large corporates and mid-caps and 20% for multinationals.
- FCI, FCI Annual Review 2026, 2026. Supports: world factoring volume of EUR 4.04 trillion in 2025.
- US International Trade Administration, Trade Finance Guide: A Quick Reference for US Exporters (2022 edition), July 2022. Supports: the risk order of the four payment terms and the Figure 2 text on risk, timing and documents.
- US International Trade Administration, Methods of Payment, undated. Supports: cash in advance lets the exporter avoid credit risk; open account as one of the highest risk options for an exporter.
- International Chamber of Commerce, ICC's new rules on documentary credits now available, December 4, 2006. Supports: first UCP in 1933; UCP 600 in force since July 1, 2007.
- ICC Digital Library, URC 522 rules text, 1995. Supports: URC 522 and the release of documents against payment or acceptance.
- International Chamber of Commerce, Incoterms rules, undated. Supports: Incoterms 2020 in force since January 1, 2020, with 11 rules; first edition in 1936.
- International Chamber of Commerce, New rules for demand guarantees effective 1 July, 2010. Supports: URDG 758 takes effect on July 1, 2010.
- UNCITRAL, UNCITRAL Model Law on Electronic Transferable Records (2017), 2017. Supports: MLETR adopted on July 13, 2017.
- legislation.gov.uk, Electronic Trade Documents Act 2023, 2023. Supports: royal assent on July 20, 2023; in force on September 20, 2023.
- IFRS Foundation, IASB increases transparency of companies' supplier finance arrangements, May 25, 2023. Supports: amendments to IAS 7 and IFRS 7, effective for annual reporting periods beginning on or after January 1, 2024.