June 21, 2024

James Fraser:

Welcome to the show. Trade finance isn’t easy. In fact, these days it can be incredibly complex. So let me break it down into something a bit more digestible. This is wool. It’s been traded for thousands and thousands of years. Archeologists have found wool and other textiles dating back to the earliest civilizations, like here in Mesopotamia. In fact, they’ve also unearthed some of the earliest examples of trade finance. Merchants issued the very first promissory notes on clay tablets like this one. This tablet is essentially a letter of credit, a promise of payment. The entire world is your neighboring region. And sure, we’ve had some amazing advances in technology to make that trading easier. We also have some things that make trade finance even more complex.

So let’s look at wool in recent years. A use case single-handedly dominated our lives just a few years ago, the hoodie. In the pandemic, we didn’t have casual Friday. We had casual every day. Demand went through the roof. So retailers try to quickly procure large amounts of inventory, impacting their cashflow. Then what happened? Supply chain issues. They couldn’t get the inventory fast enough. After all, the hoodie isn’t just wool. Lots of different suppliers, lots of different timelines. And that’s where trade finance can get tricky. Oftentimes the manufacturer doesn’t have the cash to pay the supplier upfront. They also have no idea when they’ll get paid back because items may be backordered. The price of raw goods fluctuates week after week.

One tailor-made solution to this problem is supply chain finance. It gets the supplier paid early and gives the manufacturer more time to pay, closing the working capital gap for both parties. Of course, the kicker is once the retailers got all these hoodies in stock, people started returning to the office and demand changed from this wool to this wool.

Trade finance today is challenging and always moving and that’s where JP Morgan thrives. We’ve been doing it for more than a hundred years. We have all kinds of innovative digital solutions to help improve your working capital and cashflow, so we can help you overcome whatever the world throws at you. How do we do it? Well, simple. We get to know your business, your objectives, and together we find a solution that’s right for you. Because just like this, it’s not one size fits all. Hey, do I get to take this home? Oh, cool. See you guys next week.

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