Trade finance shortens the cash cycle by funding receivables, inventory or payables one term at a time
Working capital stays tied up for the length of the cash conversion cycle. Factoring, inventory finance, payables finance and export working capital finance each work on one part of that cycle to release cash.
The cash conversion cycle counts the days cash is tied up in trade, and each day has a financing cost
The cash conversion cycle counts the days cash is tied up in trade: days sales outstanding plus days inventory outstanding minus days payable outstanding. Every day in the cycle locks up a day of sales that has to be funded.