Just as students are judged on a grading scale that ranges from A to F, many electronic products, from major appliances to air conditioning systems, are graded using the same sort of ranking to indicate their overall energy efficiency. Electronics branded as Energy Star products have been designed to comply with energy efficiency standards established by the U.S. Environmental Protection Agency and the Department of Energy that aim to reduce global greenhouse emissions. But the benefit for consumers is that purchasing products with higher ratings translates to lower energy bills and, in many cases, can even mean tax deductions. Since its introduction in 1992, the Energy Star program has expanded to include new homes and upgrades of existing homes by encouraging people to utilize more efficient windows and construction materials that can help lower overall energy usage. In search of efficiencies within their organizations, many small and midsized businesses (SMBs) are embracing online marketplaces as an easy way to expand their operations internationally and access cheaper supplies and materials overseas — a trend that has the potential to help community financial institutions (CFIs) boost their revenues and strengthen ties to SMB customers.
The global trade finance market is expected to exceed a value of $21T by 2033, according to data from Astute Analytica, and SMBs comprise a significant portion of that activity. According to data from FedEx Corp.’s Small Business Trade Index, more than two-thirds of SMBs in the US depend on imported goods, whether supplies for production or for domestic distribution of merchandise, and 82% of SMBs say that imported goods and products from overseas directly support jobs within their organizations. The Success of Global Trade for SMBsAs SMBs seek to grow their businesses, many are taking advantage of the ability to expand their reach well beyond their physical locations by marketing goods and services globally through online platforms such as Amazon, Walmart Marketplace, Etsy, Shopify, and countless others. It’s an approach that is working, as SMBs that focus on online sales are outperforming competitors that limit sales to physical stores. Roughly 52% of SMBs that utilized online sales channels in 2024 experienced increased revenue growth, compared with only 42% of their pure brick-and-mortar competitors, according to data from “SMB Growth Report: Online vs. In-Store SMBs,” a recent report from PYMNTS Intelligence. On average, online SMBs generated 21% higher revenue than businesses limited to in-store sales. On the flip side, online platforms can be a source of cheaper goods for SMBs, often providing incentives such as discounts for bulk purchases and greater access to wholesale suppliers. A major driver of the popularity of online marketplaces among SMBs is the fact that they enable small businesses to better compete with their larger peers by helping them to easily market products and access new markets and new customers. The ability to readily access supplies and merchandise online allows SMBs to reduce the amount of money they need to tie up in maintaining large inventories on hand or storing merchandise in warehouses. SMBs also value many of the tools incorporated into online platforms, such as payment support, order fulfillment and shipping, and even inventory storage, all of which can translate to significant savings. How To Assist SMBs with Trade Financing Despite the growing importance of online platforms, roughly 60% of the documentation necessary for global trade remains paper-based and many customs authorities do not yet accept electronic documentation. As a result, SMBs — which represent an ever-increasing portion of global trade, still face significant challenges accessing trade finance. While major banks such as Barclays, HSBC, and JPMorgan Chase are the most active participants in trade finance as service providers for supply chain financing, documentary credits, and letters of credit, non-traditional players such as fintechs have sought to bridge this disconnect by moving into this arena and specifically targeting the business of SMBs. As the number of players in trade finance expands, CFIs have an opportunity to boost their own revenue and strengthen ties with SMBs by stepping up their own activity on the trade finance front. Following are some of the best ways that CFIs can assist SMBs in trade finance:
The global trade finance market is expected to exceed a value of $21T by 2033, according to data from Astute Analytica, and SMBs comprise a significant portion of that activity. According to data from FedEx Corp.’s Small Business Trade Index, more than two-thirds of SMBs in the US depend on imported goods, whether supplies for production or for domestic distribution of merchandise, and 82% of SMBs say that imported goods and products from overseas directly support jobs within their organizations. The Success of Global Trade for SMBsAs SMBs seek to grow their businesses, many are taking advantage of the ability to expand their reach well beyond their physical locations by marketing goods and services globally through online platforms such as Amazon, Walmart Marketplace, Etsy, Shopify, and countless others. It’s an approach that is working, as SMBs that focus on online sales are outperforming competitors that limit sales to physical stores. Roughly 52% of SMBs that utilized online sales channels in 2024 experienced increased revenue growth, compared with only 42% of their pure brick-and-mortar competitors, according to data from “SMB Growth Report: Online vs. In-Store SMBs,” a recent report from PYMNTS Intelligence. On average, online SMBs generated 21% higher revenue than businesses limited to in-store sales. On the flip side, online platforms can be a source of cheaper goods for SMBs, often providing incentives such as discounts for bulk purchases and greater access to wholesale suppliers. A major driver of the popularity of online marketplaces among SMBs is the fact that they enable small businesses to better compete with their larger peers by helping them to easily market products and access new markets and new customers. The ability to readily access supplies and merchandise online allows SMBs to reduce the amount of money they need to tie up in maintaining large inventories on hand or storing merchandise in warehouses. SMBs also value many of the tools incorporated into online platforms, such as payment support, order fulfillment and shipping, and even inventory storage, all of which can translate to significant savings. How To Assist SMBs with Trade Financing Despite the growing importance of online platforms, roughly 60% of the documentation necessary for global trade remains paper-based and many customs authorities do not yet accept electronic documentation. As a result, SMBs — which represent an ever-increasing portion of global trade, still face significant challenges accessing trade finance. While major banks such as Barclays, HSBC, and JPMorgan Chase are the most active participants in trade finance as service providers for supply chain financing, documentary credits, and letters of credit, non-traditional players such as fintechs have sought to bridge this disconnect by moving into this arena and specifically targeting the business of SMBs. As the number of players in trade finance expands, CFIs have an opportunity to boost their own revenue and strengthen ties with SMBs by stepping up their own activity on the trade finance front. Following are some of the best ways that CFIs can assist SMBs in trade finance:
- Advise SMBs about letters of credit — bank-backed guarantees that minimize the risk of international transactions by guaranteeing that a seller will be paid the amount agreed upon once goods have been delivered.
- Offer export working capital financing, which provides short-term assistance for businesses to cover the costs of manufacturing and exporting goods.
- Provide import financing for US SMBs in need of short-term help covering the cost of purchasing supplies or products from overseas until they can be sold to end buyers.
- Assist with the documentation required for international trade transactions.
While CFIs cannot expect to displace bulge bracket banks in trade finance, there are benefits they can leverage. One of the biggest benefits that CFIs have is their in-depth knowledge of the SMBs within their community. Understanding their SMB clients helps identify trade finance opportunities for their customer base and tailor any educational offerings appropriately. CFIs may also want to consider partnerships with fintechs or other providers that have already begun offering services in this area to fill the gap quickly.
