Commodity Trade Finance Term Sheet

Empowering Physical Commodity Traders

Financely offers structured trade finance solutions for physical commodity transactions. Our expertise supports end-to-end financing, allowing clients to optimize their working capital and ensure seamless supply chain operations. Below, you'll find a detailed overview of the terms for our commodity trade finance facility.

Facility Overview

Trade Finance Term Sheet

Non-binding. Subject to KYC and AML clearance, credit approval, executed documentation, perfection of security, and insurance endorsements.
Key Terms
Eligible Borrower Operating companies and trade SPVs with audited financials, verifiable trade flows, and clean compliance. Parent or sponsor support may be required. No sanctioned parties or jurisdictions.
Facility Types
  • Transactional RCF: import, export, and working capital tied to self-liquidating trades.
  • Borrowing Base (ABL): eligible receivables and inventory with weekly borrowing base certificate.
  • Documentary Credits: DLC or SBLC under UCP 600 or ISP98. URDG 758 for demand guarantees where applicable.
  • Receivables Purchase: true sale or with recourse under a receivables purchase agreement. URC 522 for collections where relevant.
Facility Size USD 5,000,000 to USD 200,000,000. Sizing reflects eligible collateral, obligor quality, margining, and tenor distribution.
Tenor 90 to 360 days per transaction. Facilities may revolve up to 24 months subject to annual review and performance.
Collateral and Control
  • First-ranking assignment of receivables and contract proceeds.
  • Pledge over inventory under tri-party warehouse control or CMA with an approved operator.
  • Assignment of bills of lading, warehouse receipts, certificates of title, and insurance proceeds. Title documents to lender order where feasible.
  • Blocked collection account and controlled cash waterfall with sweep mechanics.
Advance Rates
  • Eligible receivables up to 85% of face value net of reserves. Single-obligor concentration typically 20% cap unless waived.
  • Inventory up to 70% of net liquidation value or lower of cost and market, net of reserves. In-transit inventory subject to reduced advance rates.
  • Confirmed LC reimbursement undertakings up to 100% subject to issuing bank risk and confirmation status.
Eligibility and Reserves
  • Receivables: maximum aging 90 days from invoice date; related-party and disputed receivables ineligible.
  • Inventory: fungible, insured, and readily marketable; obsolete or slow-moving stock ineligible.
  • Reserves may include dilution, slow pay, FX, performance, and documentation reserves at lender discretion.
Pricing
  • Floating: SOFR, EURIBOR, or SONIA plus 350 to 900 bps based on risk tier. Floors may apply.
  • LC issuance: 1.50% to 4.00% per annum, billed quarterly in advance. Bank confirmation fees are pass-through.
  • Undrawn commitment: 50 to 100 bps per annum with utilization tiers as agreed.
  • Arrangement fee: 1.00% to 2.50% flat at closing. Amendments and waivers at cost.
Use of Proceeds Purchase of goods, logistics, duties, and direct trade costs tied to eligible flows. No dividends, crypto exposure, unrelated party loans, or sanctioned uses.
Incoterms and Documents Incoterms 2020. Documentary set includes commercial invoice, packing list, transport document (BL, AWB, or CMR), certificate of origin, inspection where required, and any LC-stipulated documents.
Hedging FX and commodity hedging may be mandatory. ISDA and CSA executed where material price or FX risk exists.
Insurance Cargo or stock throughput with lender as loss payee. Credit insurance or political risk insurance where obligor or country risk warrants. Policies assignable to lender.
Financial Covenants
  • Minimum tangible net worth and debt to equity ceiling set at close.
  • Minimum interest cover and minimum liquidity buffer.
  • Borrowing base availability to remain positive. Weekly BBC and aging reports required.
Reporting and Monitoring Weekly accounts receivable aging and inventory roll-forward, monthly management accounts, quarterly unauditeds, annual auditeds. Field exams and stock counts on request.
Conditions Precedent Executed facility and security documents, perfected liens, KYC for group and UBOs, clear sanctions screen, insurance endorsements, account control agreements, acceptable legal opinions.
Events of Default Non-payment, covenant breach, cross default, material adverse effect, invalid security, sanctions breach, misrepresentation, insolvency, unlawfulness.
Governing Law England and Wales or New York law. Jurisdiction or arbitration to be agreed with lender counsel.
Fees, Retainer, and Third-Party Costs

Financely Retainer: USD 50,000 to USD 200,000 depending on scope, size, counterparty complexity, and jurisdiction.

Covered by retainer: intake and KYC pack, credit and collateral analysis, structure design and term sheet drafting, lender canvas and price discovery, LC text and conditions negotiation, security and account control blueprint, documentation workstream management through satisfaction of conditions precedent.

Exclusions: lender arrangement fees, bank LC issuance and confirmation, external counsel, audits, inspections, valuations, SWIFT and courier, hedging and insurance premiums, taxes. All third-party fees are for client account.

Closing Procedure and Indicative Timeline
  1. Day 1: RFQ and data room. Client submits mandate, KYC pack, trade flow, top customers and suppliers, and historic financials.
  2. Days 2 to 5: Underwriting. Structure grid, collateral model, advance rates, and draft term sheet prepared.
  3. Day 6: Indicative terms released and retainer invoice issued.
  4. Days 7 to 10: Lender canvas after retainer. Shortlist set. LC draft text and conditions circulated if relevant.
  5. Days 11 to 20: Confirmations, pricing lock, and documentation. Security package and account control executed in parallel. Insurance endorsements lined up.
  6. Days 21 to 30: Conditions precedent satisfied, borrowing base framework live, initial availability calculated. Funds flow agreed.
  7. Funding: RCF and ABL first draw within 2 to 4 business days post CPs. Documentary credits issued 3 to 5 business days after CPs and receipt of issuance fees.

Timeline assumes routine parameters with clean KYC and standard security. Complex jurisdictions or bespoke collateral may extend timing.

Compliance, Rules, and Standards
Documentary credits governed by UCP 600 or ISP98 as specified. Demand guarantees under URDG 758 where applicable. Collections under URC 522. Incoterms 2020. Anti-bribery and sanctions clauses are mandatory. Financely acts as arranger and advisor through regulated partners on a best efforts mandate. We are not a bank and do not take deposits.

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How We Solve Traders' Problems?

Traders often face challenges in raising capital for expansion. We solve this by facilitating access to institutional funds, thereby accelerating trading operations and capacity.

How It Works?

Our approach includes analyzing the trader's financial needs and trading strategy, followed by designing and structuring suitable debt/equity offerings. We prepare all necessary documentation and manage investor communications to secure funding.



Duration

The timeline varies based on each trader's specific needs and the complexity of the offering. Initial analysis and structuring may take weeks, with the total process extending over months.

Cost

Fees are based on the offering's size and complexity, covering structuring, documentation, and investor relations management. We provide detailed pricing upon consultation.

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For more information on how Financely can support your commodity trading needs, click the button below, submit your deal information, and we'll send you a proposal. Our structured finance team is ready to help you navigate the complexities of global trade with efficient and tailored solutions.

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