Here is the uncomfortable arithmetic of importing: you pay for goods months before your customers pay you. Every importer knows this in a vague, background-anxiety way. Far fewer have actually sat down and counted the days — and the days are where businesses quietly suffocate. Not from lack of profit. From lack of cash while the profit is in transit.
This guide is about funding that gap: the cash-flow cycle mapped day by day, the major categories of trade finance available to Australian importers, honest cost-benefit maths (including the version where the numbers say don’t), and a worked example of scaling orders from AUD 30,000 to AUD 100,000. One note first: this is educational content about categories of finance, not a recommendation of any product or provider. Get advice on your own situation from a qualified professional before signing anything.
The Anatomy of the Import Cash-Flow Gap
Let’s count the days properly, because almost nobody does. Take a typical sea-freight import of general merchandise from Asia to an Australian east-coast port, paid on the standard 30/70 deposit-balance structure.
Day 0 — deposit at order. You wire 30% of the order value to confirm production. Cash out.
Day 35 — balance at shipment. Production takes four to six weeks. When goods are ready and the bill of lading is about to issue, you pay the remaining 70%. By day 35, 100% of the goods cost has left your account, and you own inventory that is sitting in a container yard in Shenzhen or Ho Chi Minh City.
Day 55 — duty and GST at the border. The vessel takes two to three weeks; your goods arrive and the Australian Border Force will not release them until import duty and GST are settled (or GST is deferred — more on that shortly). GST alone is 10% of the customs value plus duty plus international transport and insurance, so on a meaningful order this is a five-figure cash event landing at exactly the moment you are most stretched.
Day 60 — stock in your warehouse. You can finally sell. But “can sell” and “have sold” are different planets.
Days 60 to 180 — stock sells through. Realistic sell-through for imported inventory runs 60 to 120 days depending on the product and channel. And if you sell wholesale on 30-day terms, add another month between invoice and payment: the goods are gone but the cash still isn’t yours.
Add it up. From the day the deposit leaves your account to the day the last of the sales revenue arrives, your capital is locked for somewhere between 90 and 180 days. On a AUD 50,000 order with a typical duty and freight load, that is roughly AUD 60,000 of cash — goods, freight, duty, GST — committed for up to six months before the cycle completes.
Why Growth Makes It Worse, Not Better
Here is the trap that catches profitable importers. Growth means placing the next order before the last one has finished paying you back. If your cycle is 150 days and you order quarterly, you always have at least two orders’ worth of capital locked at once — and each bigger order commits more capital before the previous, smaller order has returned its cash. A business doubling its import volume can be growing profit on paper while its bank balance walks steadily toward zero. The problem isn’t the P&L. It’s the timeline. (If you’re at that scaling stage, our guide to scaling an import business in Australia covers the operational side of the same squeeze.)
The Funding Instrument Menu
There is no single product called “import funding.” There is a menu, and each item suits a different situation. Roughly in order of cost, cheapest first:
Supplier Credit: The Cheapest Finance That Exists
If your supplier agrees to payment terms — say, 30 or 60 days after the bill of lading date — you have just borrowed at 0% per annum. Nothing else on this list comes close. Sixty-day terms after B/L means the goods are on the water, possibly already in your warehouse, before you pay a cent of the balance. Your cash-flow gap shrinks by two months with no application, no fees and no personal guarantee.
So why doesn’t everyone have it? Because supplier credit is earned, not applied for. Suppliers extend terms on two things: relationship age and order volume. A new customer pays a deposit up front, full stop — the supplier is carrying production risk on a stranger. After four or six clean cycles of paying exactly when you said you would, the conversation changes: a supplier who wants to keep your growing volume has a commercial incentive to say yes. Ask at the annual price negotiation, ask when you increase order size, and ask in stages — 30% deposit with balance at 30 days after B/L is an easier first yes than 60-day open account. Many importers never ask at all, which means paying for finance they could be getting free.
Trade Finance Facilities: Buying Time by the Day
This is the instrument most people mean by “trade finance.” The generic structure: a lender — bank or non-bank — pays your supplier on your behalf (or reimburses you at shipment), and you repay 90 to 120 days later, after the goods have landed and begun selling. The facility revolves: repay one drawdown and the limit is available for the next order.
Indicative cost across the Australian market works out to an equivalent of roughly 8–15% per annum, typically charged only on drawn funds for the days drawn. Banks sit at the lower end with harder security requirements; non-bank lenders price higher but move faster and lean more on the transaction than the balance sheet. On top of the rate, watch for establishment fees, per-drawdown fees and minimum utilisation charges — on small facilities the fixed fees can matter more than the rate.
What the facility actually buys you is alignment: your payment obligation moves from “when the supplier ships” to “when the stock has sold,” which is the entire problem this article exists to solve. What it costs you is margin, and we will do that arithmetic honestly below.
Letters of Credit: Old Instrument, Specific Job
The letter of credit is the oldest tool in this kit and has become unfashionable — paperwork-heavy, bank fees at both ends. But an LC still earns its keep in two situations: large orders where a failed shipment would seriously wound you, and new suppliers where trust hasn’t been built. Under an LC, your bank commits to pay the supplier’s bank only against presentation of compliant documents — bill of lading, commercial invoice, packing list, inspection certificate if you specify one. The supplier gets certainty of payment; you get certainty that money moves only when documents prove shipment happened as agreed.
Cost components: an issuance fee (commonly a percentage of the LC value), negotiation and document-checking fees on the supplier’s side (which the supplier prices into your goods), and amendment fees if anything changes. On small orders the fixed costs are prohibitive. But there is hidden value that rarely makes the cost comparison: documentary discipline. An LC forces both parties to specify, in writing and up front, exactly which documents will exist and what they will say. Anyone burned by a missing fumigation certificate or a bill of lading with the wrong consignee knows what that is worth — sloppy documentation is one of the most expensive habits in importing, and the LC makes it impossible.
Inventory and Stock Finance: Borrowing Against What’s Landed
Once goods have cleared the border and are in your warehouse, they are an asset — and some lenders will advance against it, typically a percentage of landed cost or resale value. Stock finance suits importers whose gap problem is on the sell-through side: goods land fine, but 90 days of inventory holding strains the account. The lender’s whole risk is the stock itself, so expect scrutiny of what the goods are, how fast they turn, and what they would fetch in a forced sale. Staple goods with steady demand finance well; anything seasonal, perishable or trend-driven finances badly or not at all.
Invoice Finance: Completing the Cycle on the Sales Side
If you sell to other businesses on 30 or 60-day terms, the last stretch of your cash gap is your own receivables ledger. Invoice finance advances most of an invoice’s value (commonly 70–85%) at issue, with the balance less fees when your customer pays. It doesn’t touch the import side at all — but paired with a trade facility it compresses the total cycle dramatically: the facility bridges order-to-landing, invoice finance bridges sale-to-payment, and your own cash covers only the stretch in the middle.
The Deferred GST Scheme: Free Relief Hiding in Plain Sight
One instrument on this menu costs nothing, and it comes from the tax office. The ATO’s deferred GST scheme lets approved importers defer the GST payable on imported goods from the moment of customs clearance to their next business activity statement. Instead of finding 10% of the landed value in cash at the border — right at the worst point of the cycle — the GST becomes an accounting entry on a BAS where it is typically offset by the matching input tax credit. The net cash effect on an ordinary import approaches zero.
Eligibility requires, among other things, monthly BAS lodgment, electronic lodgment and payment, and ATO approval. For an importer bringing in AUD 500,000 of goods a year, deferral keeps roughly AUD 50,000 from ever transiting the border-payment pinch point. It is the closest thing to a free lunch in this article, and a surprising number of eligible importers have never applied — check the current requirements on the ATO website. (GST is only one line of the border bill; our total landed cost guide walks through all of them.)
Matching the Instrument to the Situation
The menu only matters if you order the right dish. Three variables do most of the deciding:
Order size. Below roughly AUD 20–30k per order, fixed fees eat formal facilities alive — an LC or trade facility can cost more in fixed charges than in interest. At that scale, supplier terms, deferred GST and your own working capital are usually the whole toolkit. Formal facilities start making sense as orders grow and the interest component dominates the fees.
Supplier relationship age. New supplier, large order: LC territory, or at minimum a trade facility so the structure at risk is the lender’s rather than your last dollar. Supplier of three years with clean history: negotiate terms first — don’t pay a lender 12% for time your supplier might give you free.
Margin thickness. This is the variable that gets ignored and shouldn’t be. Finance cost comes straight out of gross margin, and thin-margin goods simply cannot carry it. If your landed gross margin is 20% and a four-month facility costs 4% of order value, you have handed a fifth of your margin to the lender before a single other cost. If your margin is 45%, the same 4% is a rounding decision. As a rough framework: under about 25% gross margin, financed importing needs a very good reason; over 35%, it is usually just a maths question.
Seasonality cuts across all three. A steady monthly cycle can often self-fund its steady state and reserve a facility for growth steps. A seasonal business — stock peaking for summer or Christmas — has a structural spike no steady-state cash flow can cover, which is exactly the shape a revolving facility is built for: drawn hard for the peak build, repaid flat in the off-season, costing nothing while undrawn. (Seasonal peaks are also a shipping-calendar problem — see our guide to inventory planning around Australian shipping timelines.)
What Lenders Actually Assess
Understanding the lender’s checklist saves you from applying for the wrong thing. Four items dominate:
Trading history. Lenders want completed cycles — typically 12 to 24 months of importing, selling and collecting. A trade facility funds a repeating process, and the evidence the process repeats is your history of it repeating. First-time importers are largely outside this market, worth knowing before building a launch plan that assumes finance. (If you’re at day zero, start with our guide to starting an import business in Australia — the funding conversation comes later.)
Margins. The lender reads your margin the same way we did above: it’s the buffer that absorbs their interest and still leaves you a reason to repay. Thin margins don’t just make finance expensive for you; they make you a worse credit, because one mis-priced order wipes out the cushion.
The goods as security. In transactional trade finance, the stock itself is a large part of the lender’s comfort. That means the lender is quietly asking: if this all goes wrong, what do we recover? Staple goods with a liquid resale market score well. Perishable goods and fashion-seasonal stock are often flatly unfinanceable — food that expires and summer stock in June recover cents on the dollar. Highly customised or branded-to-you goods sit in the same bucket: worth plenty to your business, worth little to anyone else.
Concentration risk. One supplier providing 90% of your stock, or one customer taking 70% of your sales, means one relationship failure collapses the repayment story. Lenders price this or decline it. Diversification isn’t just resilience strategy — it’s cheaper credit.
The FX Interaction: Double Exposure and How to Kill It
Financed orders and currency risk multiply each other — this is where quiet disasters live. Draw a trade facility to pay a USD invoice and you owe the lender a fixed AUD repayment schedule while your cost of goods still floats with the AUD/USD rate until settlement. If the Aussie dollar falls 6% between drawdown and settlement, your landed cost rises 6% — but your repayment obligation and sale prices don’t move. The margin you did the finance maths on has been silently re-cut.
This is double exposure: leverage on top of currency risk. The standard defence is a forward contract locked at the moment the finance is drawn — today’s rate fixed for the date the supplier payment falls due, so the landed cost in your approval maths is the landed cost you actually get. The forward isn’t free (the rate embeds the interest differential between currencies) but it converts an unknown into a known, and financed positions are precisely where unknowns are least affordable. An unhedged financed order is a leveraged currency bet you probably didn’t mean to place. And the rate matters twice: commercial settlement uses the market rate, while customs value uses the exchange rate on the day of export — two numbers moving on two different days.
The Honest Cost-Benefit: Run It Both Ways
Time to do the sum everyone waves at and few actually finish. Take a facility at 12% p.a. equivalent, drawn for a four-month cycle:
12% p.a. × 4 months = 4% of order value.
Now the case for. Suppose a AUD 50,000 order sold at a 35% gross margin on landed cost of AUD 60,000 — call it AUD 21,000 of gross profit per cycle. Without the facility you can’t fund this order until the previous cycle completes; with it, you can. Finance cost: 4% of AUD 50,000 = AUD 2,000, spent to unlock AUD 21,000 of gross profit that otherwise didn’t happen this quarter. Not a close decision. This is the honest heart of the pro-finance case: when the alternative is stock you couldn’t otherwise buy, the comparison is finance cost versus the entire margin on the incremental order — and thick margins win it easily.
Now the case against, run just as honestly. Same facility, but the goods carry a 22% margin — AUD 13,200 gross profit on the same order. The AUD 2,000 finance cost is now 15% of gross profit before storage, marketing, returns or your own time. Then let one thing go wrong: sell-through takes six months instead of four (finance cost now AUD 3,000), or you clear the last 20% of stock at cost (gross profit falls to roughly AUD 10,600), or the currency moves against an unhedged position. Stack two of those entirely ordinary outcomes and the financed order made you almost nothing while adding a liability with your personal guarantee under it. Same instrument, same maths, different starting margin: one is a growth engine, the other a slow leak. The discipline is running the failure case before drawing down, not after.
Red Flags in Finance Offers
Three clauses deserve special suspicion in any facility document, whoever offers it:
Personal guarantee scope. Almost every SME facility wants a director’s guarantee — that alone isn’t a red flag, it’s the market. The flag is scope: does the guarantee cap at the facility limit or is it unlimited? Does it cover this facility or all present and future obligations? Does it survive repayment until formally released? An uncapped, evergreen guarantee turns a AUD 60,000 stock facility into an open-ended claim on your house.
All-monies clauses. These make the security granted for one facility cover every amount you ever owe that lender, under any agreement, now or later. Take a small trade facility today and an equipment loan next year, and a default on either lets the lender enforce against everything securing both. Ask the plain question: does this security secure only this facility?
Cross-default triggers. A cross-default clause puts you in default on this facility the moment you default on any other obligation, anywhere — sometimes including overdue trade creditors above a threshold. One late payment on an unrelated loan can cascade into every lender calling in facilities at once. Know your triggers, and get any facility document reviewed by your own adviser before signing. That sentence is boring and it is the highest-value sentence in this section.
Worked Example: Scaling From AUD 30k to AUD 100k Orders
Meet a hypothetical importer: three years in, bringing homewares from Vietnam at a 38% gross margin on landed cost, currently ordering AUD 30,000 of goods per cycle (landed cost about AUD 37,000 with freight and duty; GST deferred). Demand supports a step up to AUD 100,000 orders. Cycle: 35 days production, 20 days transit, 100 days average sell-through — 155 days deposit-to-cash-collected.
The problem, quantified. At AUD 30k orders the business self-funds: roughly AUD 37k locked per cycle, covered by retained cash. At AUD 100k orders the lock becomes about AUD 123,000 per cycle — and because the next order must be placed around day 90 to avoid a stock gap, peak exposure hits roughly AUD 190,000 across two overlapping cycles. The business has maybe AUD 80,000 of genuinely spare cash. Gap to fund: AUD 110,000 at peak.
The structure. A sensible layered approach, cheapest instrument first:
- Supplier terms: after three years and a doubling of volume as the carrot, the supplier agrees to 30% deposit, balance 30 days after B/L. That moves AUD 70,000 of payment roughly 65 days later in the cycle — free.
- Deferred GST: already approved; about AUD 11,000 per order stays out of the border pinch — free.
- Trade facility: AUD 120,000 revolving limit at an equivalent ~11% p.a., used to pay the balance payments, drawn roughly 100 days per cycle. Interest cost per order: about AUD 2,100 — call it 2.1% of order value against a 38% margin. The facility carries a director’s guarantee capped at the limit, no all-monies clause (they asked).
- Forward contracts: each drawdown is matched with a forward on the USD invoice amount, so the landed-cost assumption in the maths above is locked, not hoped for.
The outcome. Gross profit per cycle rises from about AUD 14,000 to about AUD 47,000. Total finance cost per cycle is about AUD 2,100 plus forward points — under 5% of the gross profit it enables. Peak cash exposure for the business’s own funds stays near AUD 70,000, inside its buffer. The step-up is funded, hedged and capped. That is what a boring, correct funding structure looks like: three free instruments doing most of the work and one paid instrument doing only the part nothing free could do.
Common Mistakes
Financing thin-margin stock. The most common and most fatal. If the margin can’t carry the finance cost through the failure case, the facility isn’t fuel, it’s a countdown. Run the both-ways maths from the cost-benefit section on every financed order, not just the first one.
No FX hedge on financed orders. Unhedged plus leveraged is a currency position, not an import. If you drew the facility, lock the rate.
Personal guarantee blindness. Signing the guarantee page without reading the scope, then discovering years later that it was unlimited, all-monies, and survives repayment. Five minutes with your adviser at signing is the cheapest insurance in this industry.
Overdraft rates for trade-length funding. Funding a predictable 120-day import cycle on an overdraft or, worse, unsecured short-term business credit means paying rates designed for emergencies on a need that is entirely foreseeable. If the gap is structural, fund it with a structural instrument.
The cash-flow gap never goes away — it is the physics of importing. But it can be measured, planned for and funded deliberately instead of survived repeatedly. Count your days, know your margin, take the free instruments first, and make any paid facility prove itself in the failure case before you sign. Every business’s numbers differ: take your specific situation to a qualified finance or accounting professional before committing to any facility.
Related Reading
- How to Start an Import Business in Australia
- Scaling Your Import Business in Australia
- Total Landed Cost: What Importing to Australia Really Costs
- Customs Exchange Rates: Why the Day of Export Matters
- Inventory Planning Around Australian Shipping Timelines
Frequently Asked Questions
What is trade finance for importers?
Trade finance is short-term funding that bridges the gap between paying an overseas supplier and receiving cash from selling the goods. A lender typically pays the supplier (or reimburses you at shipment) and you repay 90 to 120 days later, once stock has landed and started selling. It sits alongside supplier credit terms, letters of credit, inventory finance and invoice finance as one of several instruments for funding the import cash-flow cycle.
How much does trade finance cost in Australia?
Indicative pricing from banks and non-bank lenders generally works out to an equivalent of roughly 8 to 15 percent per annum, charged only for the days the facility is drawn. On a four-month funding cycle, a 12 percent per annum rate costs about 4 percent of the order value. Establishment fees, drawdown fees and minimum charges vary between lenders, so always compare the total cost over your actual cycle length rather than the headline rate.
What is the cheapest way to fund imports?
Negotiated supplier credit terms are almost always the cheapest finance available. If a supplier agrees to 30 or 60-day payment terms after the bill of lading date, you are effectively borrowing at zero percent. Suppliers grant terms based on relationship length and order volume, so it usually takes several clean payment cycles before terms are on the table. The ATO deferred GST scheme is the other free lever: it moves import GST from a border payment to your BAS.
Do I need a letter of credit to import goods into Australia?
No. Most small and mid-sized Australian importers pay by telegraphic transfer using a deposit-and-balance structure. Letters of credit still make sense for large orders with new suppliers, because the bank only releases payment against compliant shipping documents. LCs carry issuance and negotiation fees, but the documentary discipline they impose — correct bills of lading, packing lists and certificates — has real value on high-stakes shipments.
What do lenders look at before approving trade finance?
Lenders assess trading history (usually 12 to 24 months of consistent import-and-sell cycles), gross margins thick enough to absorb finance costs, the resale quality of the goods as security, and concentration risk on both the supplier and customer side. Perishable, fashion-seasonal or highly customised goods are often unfinanceable because the lender cannot recover value from them if the deal goes wrong.
Should I hedge currency on a financed import order?
In most cases, yes. A financed order that is not hedged carries double exposure: you owe the lender a fixed repayment while your cost of goods floats with the exchange rate. A forward contract locked at the time you draw the finance fixes your landed cost so the finance maths you approved at order time still holds at repayment time. Speak to a qualified adviser about your specific situation before committing to either instrument.
