How Short-Tenor Bridge Loans Fund Crude & Diesel Cargoes Before LC Payment
How Short-Tenor Bridge Loans Fund Crude & Diesel Cargoes Before LC Payment
Oil traders face a familiar mismatch—suppliers need cash at loading, buyers settle against a letter of credit 30-90 days later. A trade-finance bridge loan closes that gap, advancing 80-90 % of cargo cost for 30-180 days while the LC matures. This guide covers eligibility, pricing, collateral, and a step-by-step funding timeline for crude and middle-distillate deals.
1 Cash-Gap Mechanics in Crude & Diesel Trades
Refiners lift cargo Free-On-Board, paying at sight; resellers receive funds only after discharge plus credit terms. On a 650 kbbl diesel parcel at USD 90/bbl the trader’s cash exposure tops USD 58 million for up to three months—too heavy for balance-sheet liquidity alone.
2 Facility Tenor & Draw Process
- Availability window: 12 months revolving.
- Individual draw tenor: 30-180 days (voyage + buyer credit + buffer).
- Conditions to draw: purchase contract, clean B/L, marine insurance, buyer LC copy.
3 Collateral Stack
3.1 Bills of Lading & Title
Supplier endorses the original B/L to the lender or its security agent—control of cargo until repayment.
3.2 Assignment of LC Proceeds
Buyer’s confirmed LC is assigned; issuing bank pays bridge lender first.
3.3 Marine Insurance & Pollution Cover
Policies name lender loss-payee; claims reduce outstanding principal.
4 Pricing Grid
- Margin: SOFR + 275–325 bps (crude) / + 300–350 bps (diesel).
- Up-front fee: 1 % of facility.
- Interest reserve: coupon for max tenor on first draw.
5 Covenants
- Borrowing base ≥ outstanding loan.
- Single cargo limit 25 % of line.
- Liquidity floor USD 5 million.
6 Risk Controls
- Credit insurance on buyer where rating < BBB-.
- Mandatory FX hedge when resale in non-USD.
7 15-Day Execution Timeline
- Day 0 Mandate letter.
- Day 3 Indicative term sheet.
- Day 7 Draft docs.
- Day 10 CP package.
- Day 12 Signing.
- Day 15 First draw.
8 Case Study—650 kbbl Diesel Parcel
- Cargo value: USD 58.5 m
- Advance: 85 % → USD 49.7 m
- Margin: SOFR + 320 bps
- Tenor: 95 days
- Interest cost: ≈ USD 1.1 m
Buyer LC at USD 60 m assigned; repayment on Day 80 (55 m principal + interest), trader receives surplus.
9 Financely Advantage
Our desk sources bridge lines from a pool of 180 lenders with USD 30 billion in deployable capital. Typical mandate to funding: three weeks for tickets USD 20-150 m.
Need a Bridge Line Fast?
Send cargo specs and payment terms. We return indicative pricing within five banking days.
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