The pandemic has negatively impacted small to medium-sized business (SMB) exporters and importers, with the trade finance gap widening to $1.7 trillion, 15% higher than two years ago. As global trade flows continue to rebound from COVID-19 and consumer demand is on the rise, many small businesses are struggling to capitalize on new opportunities and navigate through supply chain disruptions.

According to the U.S Chamber of Commerce, SMBs say they expect supply chain disruptions to make it difficult for their businesses well into 2022. Nearly two-thirds (64%) expect supply chain disruptions to last at least six months.

It’s no surprise to anyone that disruptions have led to a shortage of key manufacturing components, order backlogs, delivery delays and a spike in logistics and transportation costs, affecting companies of all sizes. But small businesses have been more severely impacted, due to limited access to affordable liquidity, high debt ratios and unpredictable cash flows.

Although SMBs represent more than 95% of all firms worldwide, their contribution to global trade is only 38% due to difficulties in finding business partners, accessing online payment options, and securing financing. Having relied on traditional channels to find new business opportunities, such as trade shows and in-person meetings, SMBs were left stranded once COVID-19 hit.

With the many complexities and growing challenges in logistics and transportation, technology has become critical to the future of global trade finance. It has allowed companies to regularly monitor supply and demand information, reduce market gaps, optimize interoperability between importers and exporters, and manage cash flow. It has also helped SMBs overcome challenges through digital business finance options that enable them to invest with confidence in growth and strategic business initiatives.

Disruptions and Rising Shipping Costs

Last year was a challenging one for SMBs who had to cope with logistics issues and skyrocketing freight rates amid a strong rebound in consumer demand. For this reason, it’s important for companies to have multiple sources to avoid dependency on a single supplier, meet peak demand, and face unexpected events that put their supply chains at risk.

Likewise, it’s vital that small and medium-sized companies begin to migrate their information to digital platforms that allow them to streamline the logistics chain more efficiently, providing information in real-time and replacing manual processes with digitized and automated operations.

Demands for real-time access and execution are changing the world of working capital finance, and the impact of the pandemic on the global economy has led to fluctuations in trade and supply volumes. During a November meeting in Geneva, World Trade Organization head Ngozi Okonjo-Iweala said global supply chain problems could drag on for several months, as shipping companies struggle to bridge a “supply-demand mismatch” and counter a persistent shortage of containers. In addition, delegates and academics from the private sector mentioned during this year’s WTO meeting the importance of identifying supply chain bottlenecks, implementing measures to mitigate the impact on trade, and working to make global supply chains more resilient.

Hopes of a return to some form of normalcy in global supply chains by the first quarter of 2022 have been dashed by analysts. Drewry, the maritime research consultancy, says in its latest Container Forecaster report that it doesn’t expect the supply chain crisis underpinning elevated freight rates to normalize before the end of 2022, and that “supply chain turmoil will last longer than thought.”

The Power of Digital Trade Finance

The spread of digital technologies is transforming supply chain management from a linear model, in which instructions flow from supplier to producer to distributor to consumer, into one that’s more integrated, where information flows in multiple directions.

However, a primary barrier in implementing these digital solutions by SMBs is a lack of knowledge of digital opportunities and technical expertise on how to trade with the ease and comfort enjoyed by their larger counterparts. One effective solution has been the power of digital trade finance, which facilitates:

• International trade for SMBs maximizing their working capital,
• Immediate liquidity at a fraction of the cost of higher-interest lines of credit,
• Timely payment of invoices submitted to their customers,
• Business resilience to quickly adapt to disruptions while maintaining continuous business operations, and
• Stability to navigate supply chain slowdowns and buyer payment delays.

One important thing the COVID-19 pandemic has revealed to many companies is their supply chain weaknesses and vulnerabilities, magnifying the need for building supply chain resilience and redesigning current operating models. If a disruption occurs at any link within the supply chain, traders need to be prepared. Maximizing cash flow is one of the best ways to free up the working capital needed to expedite business activities, reduce cost, and enable SMBs to expand their market presence.

Now more than ever, efficiency in supply chain management is imperative for companies to thrive, not just survive. Exporters and importers across the globe are beginning to recognize the benefits of adopting a technology-based infrastructure to minimize the exposure of supply chain risk, secure additional financing, monitor their activities in real-time, and create a foundation for economic growth.

There are many reasons for traders to be optimistic about the changes currently disrupting international trade. In the long term, accelerated trade digitization has the potential to make commerce more profitable, accessible, and streamlined than ever before.

By implementing the right strategies, SMBs can manage the risks affecting their supply chains, and rest easy knowing that they’ll have the goods and services they need to continue running a successful business, regardless of the circumstances.

Nelson Holzner is chief executive officer and co-founder of MODIFI.