by: Grow VC Group
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By Kati Suominen, Founder and CEO of TradeUp

As governments around the world look to small and mid-size enterprises (SMEs) as engines of growth, trade and job creation, a thorny challenge stands in the way: hundreds of billions of dollars of pent-up demand for trade finance.

This financing can be used as export working capital that enables a company to purchase labor and inputs to fulfill a specific export order. Or it can be used as supply chain financing that helps the company get paid faster for its export shipment than its foreign buyer wants to pay, and thus get cash flow needed to process the next order.

While critical for SME trade, such transactional financing is not enough to fuel globalizing SMEs. Debates on the trade finance gap—and on export promotion and trade and development—need to focus on the growth capital gap. Growth capital is equity and longer-term debt financing that is not aimed at any one trade transaction, but rather at expanding a company’s production and sales capabilities.

International trade has been sluggish since the‎ global economic slowdown hit in 2008. World trade grew an average of 3 percent between 2010 and 2015, after 6 percent annual growth between 1983 and 2008. Demand for trade finance is growing fast. 

These findings are indicative of a global trade finance gap, now estimated at $1.4 trillion, $693 billion of which is in developing Asia, including India and China. The gap exists also in advanced economies: In surveys in the U.S., Europe and the OECD region, SMEs unfailingly see a lack of finance as the top obstacle for them to trade across borders.

Read the whole article on TradeUp Blog.

This article was first published in BRINK News: http://www.brinknews.com/growth-capital-gap-vital-to-debate-on-trade-finance-gap/

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Grow VC Group The Grow VC Group is the world leading, global pioneer of securities crowd funding, peer to peer marketplaces, new investment models and global business development. Established in 2009, the Group has developed new investment models on six continents and continues to innovate the global market.

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