Private credit is helping narrow the $2.5 trillion trade finance gap by providing flexible, short-term funding.
Trade finance is becoming harder to access due to tariff uncertainty, stricter banking regulations under Basel III, and the decline of correspondent banking relationships.
Rather than replacing banks, private credit works alongside them by sharing risk and expanding financing capacity.

Four key pressures shape global trade today: geopolitical fragmentation, unpredictable tariffs, supply-chain realignment, and tighter regulations. Businesses suffer not from a lack of demand but from a shortage of timely, practical financing to keep products moving across borders.

Today’s $2.5 trillion gap between the financing businesses need and what they can access. For companies relying on this funding, access is becoming increasingly difficult.

Why access to trade finance is becoming harder

Trade finance underpins the real economy by providing short-term liquidity directly linked to the transaction, keeping goods moving and working capital flowing for businesses – mainly small and medium-sized enterprises (SMEs) – that can’t afford far-stretched payment dates.

Today, 80% to 90% of global trade relies on trade finance in some form. In early 2025, trade figures looked strong, but the UN Conference on Trade and Development (2025) found that much of this growth stemmed from US tariff-related front-loading and targeted investment in the US, rather than from broad-based, consumer-driven momentum.

Three reasons the system is cracking

Tariff volatility is the first major challenge. In September 2025, the WTO’s Director General warned that US trade-weighted average tariffs could rise from about 2.8% to over 20% within a year. When tariffs rise this sharply, banks become more cautious and reject more deals, favouring larger, simpler transactions over smaller or more complex ones.

The second is banking regulation. Under Basel III, capital and compliance costs have risen, prompting banks to be more selective about where they deploy lending capacity. Trade credit, particularly for smaller businesses or higher-risk markets, is often deprioritised because of the regulatory burden and associated costs.

The third, and least visible, is the erosion of correspondent banking relationships (CBRs). As anti-money laundering and counter-terrorism financing rules (AML/ CFT) tightened, banks cut ties with counterparts in many markets, not only those deemed risky but also those with lower potential.

The UN report found that the ten countries most affected by CBR losses saw exports fall by 13% on average, whereas less affected countries saw little slowdown.

Banks have not abandoned the large trade finance scene, though the gaps left behind hit SMEs and mid-caps hardest, as they sit at the centre and rely on much of the global supply chains.

The growing role of private credit in trade finance

Over the past decade, private credit has evolved into a major source of non-bank capital. The US private credit market is roughly $1.1 trillion today, while Europe is around $505 billion (2024). Global assets under management have surpassed $1.7 trillion, though they are often cited at around $3.5 trillion.

Investors focus on short-term loans that finance specific trade transactions, are backed by physical goods, and automatically repay (self-liquidate) upon deal completion. For private credit managers, these traits are compelling amid macroeconomic uncertainty. Their flexibility enables more responsive, adaptable financing, unhindered by traditional deposit and regulatory capital requirements.

Keeping liquidity moving through supply chains

A tangible contribution of private credit is bridging working-capital gaps left by cautious banks. This enables businesses to finance receivables, inventory, and payables, thereby preserving business continuity. It matters most for smaller and mid-sized firms.

When smaller companies can’t finance goods in transit, the impact extends beyond a single balance sheet: delayed shipments, strained supplier relationships, and reduced capacity to fulfil orders.

Trade finance is not intended to increase leverage. Well-structured facilities are linked to transactions and are repaid as goods sell and payments come in. The goal is to use liquidity efficiently, not to expand the balance sheet.

A collaborative model, not a competitive one

The rise of private credit reflects a collaborative approach in which banks create and manage trade finance assets, partnering with private credit funds to share risk or expand capacity. When banks struggle, global trade suffers, particularly in capital-intensive sectors such as commodities. The aim is not to avoid banks but to make the entire trade ecosystem more resilient.

How technology is supporting the shift

Technology has not fully transformed trade finance, though it has made it easier for private credit to participate. With better-quality data, digital documents, and real-time shipment tracking, a fund in London or New York can see exactly where goods are, check whether deliveries are on time, and know when payments are due, without needing a local banking presence in every market.

Such visibility renders risk easier to measure and manage. While it does not eliminate risks, it can price and handle risks more consistently.

Risks along with considerations for investors

Non-bank borrowing costs are often higher than those of traditional bank funding. Such an added cost puts more pressure on borrowing businesses, thereby increasing repayment risk for investors.

Investors are advised to accept lower liquidity, as funds invested in private debt deals often cannot be withdrawn swiftly. Transactions might be priced in foreign currencies, exposing investors to a foreign exchange risk and lower returns, even if the borrower paid in full in the foreign currency.

Transparency standards vary across managers and structures, making due diligence critical rather than merely a formality. For investors seeking short-duration income directly linked to the real economy, trade finance offers a unique alignment of yield, visibility, and economic relevance.

At a time when parts of the financial system are becoming abstract, this link to real commerce matters. The global economy is shifting towards growth led by the Global South, even as their access to finance becomes more restricted. While private credit is no substitute for strong banks, it provides flexible capital and expands capacity in partnership with banks. This role is key to keeping trade alive.

Trade Finance Global

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