How to Raise Pre-Shipment Finance for African Metals
Exporters and traders of metals from Africa face a recurring challenge: working capital is tied up in production and logistics long before the buyer pays. Pre-shipment finance, also called purchase order financing, unlocks liquidity against confirmed orders, offtake contracts, or letters of credit. When structured properly, this type of facility bridges the gap between sourcing ore or concentrate and receiving payment offshore.
Outcome:
secured funding that allows metals to be mined, processed, and shipped without straining the exporter’s balance sheet.
When Pre-Shipment Finance is the Right Tool
This structure is most useful for producers and traders handling commodities like copper cathode, cobalt hydroxide, or manganese ore. Common cases include:
- Confirmed purchase orders from international buyers with deferred payment terms
- Offtake agreements that lock in volumes and pricing
- Letters of credit (LCs) issued in favor of the exporter, requiring upfront working capital to prepare the cargo
- Situations where production, grading, and export logistics require significant cash outlays before shipment
How Purchase Order Financing Works
Lenders provide an advance against the value of a confirmed PO or contract. The facility usually covers the cost of raw materials, processing, and logistics. Repayment is structured directly from the buyer’s payment under the LC or invoice. This reduces counterparty risk and gives the financier comfort that repayment is tied to the trade flow.
| Step |
What Happens |
| 1. PO or LC Confirmed |
Exporter receives a purchase order or letter of credit from a recognized buyer. |
| 2. Financing Request |
Exporter applies for pre-shipment finance, submitting trade documents and collateral map. |
| 3. Disbursement |
Lender advances funds to cover mining, processing, and logistics costs. |
| 4. Shipment and Payment |
Cargo is shipped; buyer pays under LC or invoice; lender is repaid directly. |
Collateral and Control Mechanisms
To make pre-shipment finance work for African-origin metals, lenders typically require controls:
- Warehouse receipts or collateral manager oversight for stockpiled ore or concentrate
- Assignment of receivables or LC proceeds directly to the financier
- Insurance coverage for cargo in transit and at port
- Performance undertakings from the exporter or processing partner
These structures ensure that funds are used to generate the export flow and that repayment is not dependent solely on the exporter’s balance sheet.
Common Challenges and How to Overcome Them
- Counterparty Risk:
Lenders will only fund against credible international buyers. Mitigate by securing contracts with established traders or smelters.
- Documentation Quality:
Weak POs or ambiguous contracts won’t be accepted. Legal clarity is critical.
- Operational Track Record:
Financiers look for exporters with proven shipping and compliance history.
- FX and Repatriation Risk:
Payments must be received offshore in convertible currency; local FX restrictions can complicate flows.
Pre-shipment finance is not about plugging a gap; it is about giving exporters the ability to grow volumes, honor contracts, and build credibility with international buyers. With the right structure and counterparties, African-origin metals can move faster and on stronger terms.
Raise Pre-Shipment Finance
Share your purchase orders, contracts, or LC details. We will structure a pre-shipment finance facility that aligns with your trade flows.
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Financely is an advisory and placement firm. We are not a lender or issuer. All financing is subject to credit approval, KYC/AML compliance, sanctions screening, and enforceable documentation. Terms vary depending on buyer quality, jurisdiction, collateral, and market conditions.