London-based Tradeteq, which claims to be the first electronic trading platform for the institutional trade finance market, says that small- and medium-sized enterprises (SMEs) will find it harder to access letters of credit (L/Cs) in the wake of the coronavirus pandemic.

In a whitepaper, Trade Finance in 2020: Asset Distribution - A Macroeconomic Necessity, Tradeteq highlights how SMEs are under strain as a result of the pandemic and calls for a greater distribution of trade finance assets to non-bank investors to help smaller businesses through the crisis.

Struggling SMEs

As SMEs are less likely to receive L/Cs from banks during the crisis, the need for other options must be considered says Tradeteq.

It says that its solution to distribute trade finance assets to non-bank investors will help both banks and businesses continue to function in this uncertain climate.

Unlocking liquidity

The paper also reckons that distributing assets to alternative investors has the potential to unlock millions of dollars in liquidity, helping to plug the trade finance gap which currently stands at least US$1.5 trillion.

This in turn will greatly reduce the risks banks have on their balance sheets, creating new avenues for growth in the market the paper concludes.

Win-win solution

Tradeteq's CEO, Christoph Gugelmann, says distributing trade finance assets to alternative investors provides a win-win solution everyone. "Banks are able to operate with less risk, and businesses access trade finance much more easily," he says.

"This paper aims to highlight the points that will not only support SMEs...but allow them to thrive afterwards," he concludes.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.