Trade Loan
A Loan Against Securities (LAS) is a secured loan provided by banks and financial institutions where borrowers pledge their financial assets—such as shares, mutual funds, bonds, insurance policies, or fixed deposits—as collateral.
Types of Trade Loan
Below are the main types of trade loans offered by banks and NBFCs in India:
Domestic Trade Loan
Offered to wholesalers, distributors, and retailers engaged in trade within India.
Export Trade Loan (Pre-Shipment Finance)
Provided to exporters to procure raw materials, manufacture goods, and cover shipping expenses before export.
Import Trade Loan (Post-Shipment Finance)
Given to importers to pay overseas suppliers while awaiting delivery or resale of goods.
Bill Discounting / Invoice Financing
Traders can use unpaid customer invoices or bills of exchange as collateral to get immediate cash flow.
Letter of Credit (LC) Backed Loan
Banks issue a Letter of Credit guaranteeing payment to a supplier, which can be used to obtain a loan against the LC for fulfilling large trade orders.
Overdraft / Cash Credit for Traders
A revolving credit line allowing traders to withdraw funds as needed for working capital.
Why Is Trade Loan Important?
Ensures Smooth Cash Flow
Provides funds to manage daily trade operations and bridge the gap between supplier payments and customer receipts.
Supports Business Growth
Enables traders to accept larger orders, expand inventory, and grow their trade networks.
Reduces Working Capital Pressure
Offers immediate liquidity without affecting the company’s main operational funds.
Facilitates International Trade
Helps importers and exporters manage foreign transactions smoothly with financing support from banks.
Builds Supplier Relationships
On-time payments to suppliers enhance credibility and improve trade partnerships.
FAQs
What is a Trade Loan?
A Trade Loan is a short-term business loan that provides financial assistance to traders, exporters, and importers for managing working capital and trade operations.
Who can apply for a Trade Loan?
- Importers and Exporters
- Wholesalers and Distributors
- Retail Traders and Merchants
- Manufacturers involved in trade supply chains
What is the typical loan amount?
Loan amounts generally range from ₹5 lakh to ₹10 crore, depending on turnover, credit score, and business volume.
What is the interest rate on Trade Loans?
Interest rates typically range between 8% and 14% per annum, varying by lender and risk profile.
What is the tenure of a Trade Loan?
Usually short-term, ranging from 30 days to 12 months, aligned with trade or shipment cycles.