Small and medium-sized enterprises (SMEs) often struggle to access trade finance services, which can include things like letters of credit, invoice financing, and supply chain financing. This can be a significant hurdle for SMEs, as trade finance can help these companies grow and compete in the global marketplace.
One reason why SMEs may lack access to trade finance is due to a lack of collateral. Many trade finance providers require collateral, such as real estate or inventory, to secure a loan. However, many SMEs may not have the assets or resources to provide this collateral.
Another reason is a lack of credit history or financial track record. Trade finance providers often rely on credit ratings and financial statements to assess the risk of a loan. SMEs may not have a long history of financial performance or may not have established a credit rating, making it difficult for them to secure trade finance.
Additionally, SMEs may also face difficulty in meeting the documentation requirements of trade finance providers. This can include providing detailed information about the company and its operations, as well as information about the specific trade transaction being financed. SMEs may not have the resources or expertise to provide this information, which can make it difficult for them to access trade finance.
It is difficult to estimate the exact market gap of trade finance services for small and medium-sized enterprises (SMEs), as it can vary depending on factors such as location, industry, and the specific needs of the SME. However, it is widely acknowledged that there is a significant gap in access to trade finance for SMEs.
According to the International Chamber of Commerce (ICC), around 80% of global trade is financed by banks, but only 20-25% of SMEs have access to trade finance. This means that a large percentage of SMEs are unable to access the financing they need to participate in global trade.
The World Bank Group’s International Finance Corporation (IFC) estimates that the global trade finance gap for SMEs is around $1.5 trillion. This gap is particularly acute in developing countries, where the majority of SMEs lack access to trade finance.
Additionally, the trade finance gap is also affected by the COVID-19 pandemic which causes a huge disruption in global trade, causing a huge trade finance gap, making it difficult for SMEs to access the financing they need to continue operations and participate in global trade.
In conclusion, SMEs may lack access to trade finance services due to a lack of collateral, lack of credit history or financial track record, and difficulty in meeting documentation requirements. This lack of access can make it difficult for SMEs to grow and compete in the global marketplace.
Tulyp is a BtoB payment and financing solution that supports importers and exporters on a daily basis. As a FinTech specializing in Trade Finance, we support them in their payment guarantee, financing and liquidity issues. If you have any questions, please contact us. One of our experts will contact you within 24 hours.