Nordea Bank: Trade Instruments to Support Suppliers' Working Capital

Helsinki – As the global economy slows and inflation and interest rates rise, Nordea Bank Abp is advising companies to utilize traditional trade finance instruments to support critical suppliers within their supply chains.

The bank highlights that smaller suppliers, particularly in emerging economies, often struggle with a lack of working capital. This deficit impacts their ability to procure raw materials, pay wages, and invest in new technologies, posing a risk to the entire global supply chain that relies on these entities.

Richard Hayes, Head of Trade Solutions Denmark at Nordea, emphasizes that traditional trade instruments, such as import letters of credit with financing, can provide a solution. These instruments offer suppliers access to working capital finance more quickly than traditional payment terms, while also reducing currency risks and shortening credit exposure.

By securing financing with deferred payment terms, large buyers can ensure supply chain stability. This practice also serves as a socially responsible business measure, supporting suppliers' financial stability and operational capabilities.