Trade loan
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A bank lends money for one import or export deal, and the loan is paid back from the money that deal brings in.
Terms like this have a quick explainer. Tap or hover on them.
01 · In plain words
A bank lends you money for one trade deal, and the deal itself pays the loan back
A is a short-term loan for one import or one export. The bank lends the money. The business pays it back when the trade brings money in. No ICC rule set uses the name "trade loan", so this card uses a working meaning built from the sources below.
For an exporter, the US International Trade Administration (ITA) calls this . It lets exporters buy the goods and services they need for their export sales (US ITA). The loan can cover a single export deal. Or it can be a revolving line of credit. You can draw on it, repay, and draw again for many export deals (US ITA).
For an importer, a bank can lend cash after the goods are bought, so the importer can pay its supplier now and repay later. The European Bank for Reconstruction and Development (EBRD) calls these cash advances for "pre-export and post import financing" (EBRD).
Who is involved
- The importer or exporter gets the loan for one trade deal.
- The lending bank provides the money and agrees the terms.
- Sometimes a guarantor backs the loan for the bank. In the US, EXIM's Working Capital Loan Guarantee gives the lender a 90% guarantee (US EXIM).
- The foreign buyer or supplier on the other side of the trade. Their payment or delivery completes the deal.
02 · How it works
Six steps take the loan from the trade contract to repayment
Figure 1 · Interactive
A trade loan, step by step
Read down the steps. The last step is where the bank is repaid.
Source: steps put together from US International Trade Administration, Trade Finance Guide, July 2022 and EBRD, March 21, 2019. The order is illustrative.
03 · What it means for you
The exporter gets cash to make the order, and the importer gets time to sell before repaying
Figure 2 · Interactive
What a trade loan means for each side
Choose your side of the trade.
04 · Worked example
On a $1 million, 90-day trade loan at 6% a year, illustrative costs add up to $15,500
This example uses round, made-up numbers to show how the cost builds up. The loan runs for 90 days. Interest is worked out on a 360-day year, the US money market (Federal Reserve). Real rates and fees vary by bank, country and deal.
Figure 3 · Illustrative
Cost of a $1,000,000 trade loan for 90 days
Illustrative inputs. The total is highlighted.
Made-up rates, worked out by our checking script. Your bank's rates and fees will differ by bank, country and deal.
05 · When to use it
A trade loan suits one clear deal that pays back within about a year
Good fit when
- You have one clear import or export deal, and the money comes back within about a year. The US ITA says a single-deal export loan is generally issued for up to one year (US ITA).
- You trade often. A revolving line is generally issued for one year and can sometimes run for three to five years (US ITA).
- As an exporter, you have money owed by customers and stock that you can offer as security.
Another tool may suit better when
- You sell large capital equipment on long terms. The US ITA says medium-term export credit insurance usually covers large capital equipment for up to five years. Look at ECA-backed finance.
- You have a firm order from a strong buyer but few assets to offer. Look at purchase order finance or pre-export finance.
- You want a bank's promise of payment more than cash. Look at a letter of credit.
06 · Rules and a real case
A trade loan follows its own contract, and a development bank has backed such loans
No ICC uniform rules apply to the loan itself. The bank and the business set the terms in the loan agreement. Where the loan is secured on goods and money owed by customers, a model law from UNCITRAL (2016) sets rules for that kind of security, in countries that adopt it. If the loan pays for a , the LC follows when it says so (ICC).
Trade finance is short. Citing the ICC trade finance register, the Basel Committee on Banking Supervision reports an average of 115 days for trade finance transactions. That average covers all kinds of trade finance (BCBS, October 2011).
A real case. On March 21, 2019, EBRD announced a US$ 20 million trade finance facility for UzPromstroybank, a bank in Uzbekistan, under its Trade Facilitation Program. The facility went to the bank itself. The bank can use up to 50 percent of that limit as cash advances for pre-export and post import financing. Through the program, EBRD also gives guarantees to international confirming banks and takes on the risk of not being paid because of politics or a failed business (EBRD news).
Summary
A trade loan funds one deal and is repaid from that deal
The bank lends for one import or export, or through a revolving line for many. The exporter gets cash to fill the order, and the importer gets time to sell. Repayment comes from the trade itself, so the deal has to go through. Check the security the bank wants, the term, and the currency before you sign.
Related guides: Working capital and trade finance; Pre-shipment vs post-shipment finance; How trade finance is priced; Tenor explained. Related cards: Pre-export finance; Purchase order finance; ECA-backed finance (buyer and supplier credit). Every term is in the Trade Finance Glossary.
Sources
- US International Trade Administration, Trade Finance Guide: A Quick Reference for US Exporters (2022 edition), July 2022. Supports: export working capital, single-deal loans and revolving lines, terms, security, who can get it, the SBA program, capital equipment terms
- Export-Import Bank of the United States, Working Capital Loan Guarantee, undated. Supports: the 90% guarantee to the lender
- European Bank for Reconstruction and Development, EBRD supports trade in Uzbekistan, March 21, 2019. Supports: pre-export and post import cash advances, guarantees to confirming banks, the real case
- Basel Committee on Banking Supervision, Treatment of trade finance under the Basel capital framework, October 2011. Supports: the 115-day average tenor
- UNCITRAL, UNCITRAL Model Law on Secured Transactions (2016), 2016. Supports: security over goods and receivables
- International Chamber of Commerce, UCP 600, Uniform Customs and Practice for Documentary Credits, in force July 1, 2007. Supports: the rules an LC can follow
- Board of Governors of the Federal Reserve System, Selected Interest Rates (Daily), H.15, September 29, 2026. Supports: the 360-day year in the worked example
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