End-to-End Financing Chain: From MT 799 Proof-of-Funds to Bridge Loan to Transferable LC
End-to-End Financing Chain: From MT 799 Proof-of-Funds to Bridge Loan to Transferable LC
Large commodity trades rarely close on goodwill alone. Sellers insist on watertight evidence of funds; buyers need to conserve cash for multiple cargoes. A proven solution is a three-step chain— MT 799 Proof-of-Funds (POF) → 30-120-day Bridge Loan → Transferable Letter of Credit. This article digs into every phase: message wording, compliance checks, loan structuring, LC mechanics, cost stack, timetable, and failure traps. Sponsors moving USD 20–250 million cargoes will walk away with an actionable blueprint.
1 Why Use Three Links Instead of One?
| Gap | Problem Created | Bridge-Chain Fix |
|---|---|---|
| Seller confidence | Allocation held until funds verified | MT 799 proves cash within 24–48 h |
| Bank processing | Buyer’s LC can take 10–15 working days to issue | Bridge loan covers cargo cost during LC drafting |
| Cash utilisation | Locking 100 % cash in LC hurts trading velocity | Bridge lends 80-90 %, LC repays loan on arrival |
2 Proof-of-Funds (MT 799) Deep Dive
2.1 What Makes MT 799 Credible?
MT 799 is a free-format Swift message used for authenticated bank-to-bank correspondence. Unlike emails or “bank letters” on letterhead it passes through the Swift network, giving counterparties comfort that:
- The originator is an actual bank (verified BIC code).
- The funds cited are present, unencumbered, and reserved.
- The message can be queried via Swift call-back.
2.2 Mandatory Data Points
| Field | Why It Matters |
|---|---|
| Account Holder (exact legal name) | AML / KYC match |
| Amount & Currency (figures & words) | Avoids misinterpretation |
| Value Date & Expiry | Defines reservation window |
| Purpose Reference | Ties funds to specific SPA |
| Free-of-Lien Statement | Shows funds are unencumbered |
2.3 MT 799 vs MT 760 vs MT 199
MT 760 creates a binding guarantee—good for final deal, expensive upfront. MT 199 is informal and often rejected. MT 799 sits in the middle: low fee, verifiable, widely accepted for soft allocation.
3 Bridge Loan Design
3.1 Advance & Pricing Grid
| Cargo Type | Advance % | Margin (SOFR +) |
Up-front Fee |
|---|---|---|---|
| Crude oil | 85 % | 275–325 bps | 1.0 % |
| Refined products | 80-88 % | 300–350 bps | 1.0-1.2 % |
| Grains & sugar | 85-90 % | 300–375 bps | 1.2 % |
3.2 Security Package Checklist
- Endorsed bill of lading or warehouse receipt.
- Assignment of LC proceeds to lender collection account.
- All-risks marine / inland transit insurance—lender loss-payee.
- Optional performance bond from sub-investment-grade supplier.
3.3 Covenants & Ongoing Tests
| Metric | Threshold | Test Frequency |
|---|---|---|
| Borrowing Base | >= 100 % | Weekly |
| Single Cargo Exposure | < 30 % of facility | Per draw |
| Liquidity Floor | > USD 5 m or 10 % of debt | Monthly |
4 Transferable Letter of Credit Essentials
4.1 Why Transferability Matters
A transferable LC lets a trader pay the upstream seller and then assign the same LC rights to a downstream buyer, saving issuance fees and reducing documentary risk.
4.2 Key LC Clauses Lenders Insist On
- Article 38 flagged “TRANSFERABLE”.
- Issuing bank rated BBB- or better, or confirmed by such.
- Expiry & latest shipment aligned with bridge tenor + 10 days.
- Clean document list—B/L, inspection cert, commercial invoice, no extras.
5 Putting It All Together—Cash Flow Waterfall
| Day | Step | Primary Document |
|---|---|---|
| 0-2 | MT 799 issued & verified | Swift copy + bank call-back |
| 2-7 | Bridge loan signed & funded | Facility agreement + security docs |
| 8-18 | Buyer LC processed | LC draft & compliance approvals |
| 18-25 | Transferable LC issued & assigned | UCP 600 LC + assignment notice |
| 25-65 | Seller draws, LC pays lender | Conforming docs under LC |
| 65-70 | Bridge repaid; surplus to trader | Repayment statement |
6 Failure Modes & Mitigations
| Risk | Impact | Mitigation |
|---|---|---|
| MT 799 from non-Swift “bank” | Seller rejects allocation | Use tier-one bank or confirm via correspondent |
| LC document list too long | Discrepancies, payment delay | Stick to standard 3-4 docs; pre-approve wording |
| Cargo value drop > margin | Borrowing-base breach | Hedge futures; maintain equity buffer |
| Buyer credit line pulled | LC issuance stalls | Back-up offtaker clause; political-risk cover |
7 Detailed Case Study—USD 35 Million Crude Allocation
| Key Metrics | |
|---|---|
| Cargo Value | USD 35 m (FOB West Africa) |
| MT 799 Amount | USD 40 m |
| Bridge Advance | 85 % → USD 29.75 m |
| Bridge Tenor | 70 days |
| Interest Cost | SOFR 5.3 % + 300 bps ≈ USD 480 k |
| Transferable LC Face | USD 37 m |
| Total Financing Cost | ≈ 1.05 % of cargo value |
Timeline: MT 799 Day 1 → Bridge funded Day 6 → LC issued Day 18 → Bridge repaid Day 60 → Trader nets USD 640 k after freight and fees.
8 Financely’s Execution Capacity
Financely coordinates the entire chain. Our 180-lender network holds more than USD 30 billion in deployable capital, covering proof-of-funds issuers, bridge-loan desks, and LC-issuing banks. Transactions between USD 20 million and USD 250 million close in as little as three weeks from mandate.
Need MT 799, Bridge Funding, or LC Capacity?
Upload your trade summary—commodity, volume, route, payment terms—and receive a structuring plan with indicative pricing inside five banking days.
Request a QuoteGet Started With Us
Submit Your Deal & Receive a Proposal Within 1-3 Working Days
Submit your deal using our secure intake form, and receive a quote within 1-3 business days. Existing clients can connect with their relationship manager through our secure web portal.
All submissions are
promptly reviewed, and all communications are conducted through the intake form or the client portal for a seamless and secure process.
Thank you for considering working with us. A nominal fee of US$500 is required upon completion of each form. This fee covers the time and effort we invest in reviewing your submission and crafting a thorough proposal. We receive numerous inquiries and prioritize those that carry this fee, ensuring serious applicants receive prompt attention.
Trade Finance
Tap into solutions like letters of credit, bank guarantees, and payment facilitation. We address the challenge of global transaction risk through structured strategies that foster cross-border growth. Complete the form to unlock streamlined funding aligned with your commercial objectives.
Submit a RequestProject Finance
Access non-recourse funding for infrastructure, renewable energy, or other capital-intensive ventures. We mitigate capital constraints by isolating project assets and focusing on risk management. Provide your details to receive a structure that drives growth and maximizes returns.
Submit a RequestAcquisitions
Secure financing for business or real estate acquisitions. We ease transaction hurdles by reviewing cash flow, synergy opportunities, and exit plans. Complete the form for a customized proposal that supports your strategic investment objectives.
Submit a RequestFor Banks
Financely assists banks facing Basel III pressures by distributing trade finance deals and providing collateral for letters of credit. We reduce capital burdens while preserving client relationships and fostering service expansion. Submit your request to optimize your trade finance offerings.
Submit a RequestOnce we receive your submission, our team will review your information to determine feasibility. If eligible, you will receive a proposal or term sheet within 1–3 business days. Visit our FAQ and Procedure pages for more information.
Disclaimer: Financely provides financing based on due diligence and feasibility. Approval is not guaranteed, and past performance does not predict future outcomes. All terms are subject to review. Financely primarily assists with structuring and distribution. Qualified parties carry out the project if the client approves the proposal.
