Guide to Third-Party-Secured Financing

Third-party-secured financing refers to credit facilities where a party other than the borrower provides collateral or guarantees to support the transaction. This setup is commonly used when the borrower lacks sufficient assets or track record to obtain funding on a standalone basis. It can involve corporate guarantees, pledged assets, cash collateral, or standby letters of credit from a third party—usually a strategic partner, supplier, customer, or related entity.

1. What Is Third-Party Security?

• Collateral or guarantees provided by a separate legal entity—not the borrower.
• Secures repayment of a loan or credit facility extended to the borrower.
• Used in trade finance, working capital lines, bridge loans, and structured project funding.

2. Typical Third-Party Security Structures

• Corporate Guarantee: A parent or affiliate guarantees repayment obligations of the borrower.
• Pledge of Assets: A third party pledges real estate, inventory, shares, or receivables.
• SBLC / Bank Guarantee: A bank issues a standby letter of credit or guarantee on behalf of a third party.
• Cash Collateral: A third party deposits funds in a secured account pledged to the lender.
• Insurance Wrap: A credit insurer or monoline insurer guarantees lender repayment in case of default.

3. When Does It Make Sense?

• The borrower is a new entity or lacks audited financials.
• The project is high-margin but lacks collateralizable assets.
• Partners (offtakers, suppliers, shareholders) benefit commercially from the borrower’s success.
• Cash is locked in escrow, and the lender needs fallback rights.

4. Risks and Considerations

• Legal enforceability: Guarantees and pledges must be properly documented, governed by appropriate law, and registrable.
• Creditworthiness of the third party: Lenders focus more on the guarantor’s financial health than the borrower’s.
• Cross-default risk: If the third party has other debt obligations, lenders may require seniority or carve-outs.
• Regulatory risk: Certain jurisdictions impose restrictions on upstream or sideways guarantees.

5. Lender Security Requirements

• Notarised pledge or charge over the third-party asset, with public registration where applicable.
• Direct agreement with third-party guarantor or collateral provider.
• Assignment of income streams (dividends, rents, receivables) to support repayment.
• Cash flow visibility, including escrow or waterfall structures to protect lenders.
• Cross-indemnities and waivers of subrogation to avoid repayment delays.

6. Underwriting Process at Financely

• Review borrower’s business plan, cash flow forecast, and use of funds.
• Assess the third-party’s financials, legal authority to pledge or guarantee, and relationship to borrower.
• Coordinate with legal counsel to structure enforceable security and compliance with local laws.
• Prepare a lender pitch deck and risk memo, including sensitivity analysis and fallback mechanics.
• Negotiate indicative terms and issue a non-binding term sheet, subject to lender feedback.

7. Financely’s Role in Third-Party-Secured Deals

• Sourcing and advising borrowers eligible for third-party credit enhancement.
• Structuring and documenting collateral pledges, guarantees, and SBLC-backed facilities.
• Connecting to lenders open to third-party-secured exposure (family offices, credit funds, banks).
• Leading due diligence, valuation, and covenant negotiation on behalf of clients.
• Providing post-closure support, including covenant monitoring, waivers, and restructuring if needed.

8. Example Use Cases

• Commodity traders: Use supplier or off-taker SBLCs to access bridge financing for shipments.
• Real estate developers: Secure debt using land pledged by a landowner or municipal authority.
• SPVs in energy: Raise funds against guarantees from EPC contractors or joint venture partners.
• Exporters: Secure pre-shipment finance against receivables backed by foreign buyer guarantees.

9. What We Look For

• Strong economic rationale between borrower and third-party guarantor or pledgor.
• Clean legal title and transferability of pledged assets.
• Willingness of guarantor to sign direct agreements and provide required disclosures.
• Minimum facility size: $5 million.
• Eligible jurisdictions: US, EU, UK, UAE, Singapore, select African markets.

10. Ready to Explore a Third-Party-Secured Facility?

If your company has a credible commercial partner, shareholder, or affiliate willing to secure a facility on your behalf, we can help structure and raise the capital required. Our role covers deal structuring, lender sourcing, underwriting coordination, and ongoing monitoring—on a fully transparent, fee-based model.

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All financing is subject to legal due diligence, financial underwriting, and lender approval. Financely does not provide guarantees, nor does it accept crypto or third-party payments outside formal engagement terms.