Trade-Finance Bridge Loans for Commodity Imports: Tenor, Collateral Packages, and Repayment Waterfalls

Importers moving crude, grains, metals, or fertiliser face a cash gap between shipment and end-buyer payment. A trade finance bridge loan fills that gap, funding cargo costs for 30 to 180 days while the receivable converts. Below we set out accepted structures, pricing bands, and risk controls for ticket sizes above USD 20 million—information corporate treasurers search for under phrases like “ commodity import financing ”, “ warehouse receipt collateral ”, “ assignment of proceeds letter of credit ”, and “ short tenor bridge loan ”.

1. Import-Export Cash-Gap Problem Statement

Suppliers often demand payment at loading, yet offtakers settle 45–90 days after discharge. During that window importers must fund:

• Supplier pre-payment or sight-LC settlement.
• Ocean freight, bunker fuel, and port costs.
• Insurance, inspection, storage, and quality testing.

A single 500 000-barrel crude cargo at USD 80 per barrel locks up USD 40 million for up to three months—capital that could otherwise support margin calls or other trades. A dedicated bridge facility preserves liquidity.

2. Bridging-Loan Tenor and Draw Mechanics

Tenor aligns with voyage length plus invoicing terms and a prudent buffer—shortest draws at 30 days, longest at 180. The facility includes a 12-month availability window for multiple tranches. Each drawdown requires:

• Signed purchase contract and commercial invoice.
• Clean on-board bill of lading.
• Evidence of all-risks marine cargo insurance naming the lender as loss-payee.
• Copy of onward sales contract or LC issued by the offtaker.

Advance rates run 80–90 % of cargo cost. Excess freight or demurrage can be financed if the borrower adds cash margin or a parent guarantee.

3. Collateral Stack—Warehouse Receipts, Assignment of Proceeds, Marine Insurance

3.1 Warehouse Receipt Collateral

If repayment occurs after discharge, title shifts into a bonded warehouse controlled by an independent collateral manager such as Control Union or Louis Dreyfus Company. The warehouse issues a negotiable receipt endorsed to the lender, securing the borrowing base until sale.

3.2 Assignment of Proceeds

Where the offtaker opens a documentary or standby letter of credit, its proceeds are assigned to the lender. On maturity, the issuing bank pays into a blocked account, removing collection risk.

3.3 Marine Cargo Insurance

First-loss cover protects against damage, piracy, or pollution. Policies are endorsed to the lender so any payout automatically reduces the outstanding principal.

4. Pricing: Margin, Up-Front Fee, Interest Reserve

Current terms for investment-grade counterparties:

• Margin: SOFR + 250–350 bps.
• Arrangement Fee: 0.75–1.25 % of facility size.
• Interest Reserve: Coupon for the maximum tenor on the first draw (ring-fenced cash).

For a USD 30 million, 120-day tranche at an 8 % all-in rate, the reserve equals roughly USD 800 000.

5. Borrowing-Base and Concentration Covenants

• Borrowing-Base Test: Eligible Value × Advance Rate − Loan Balance ≥ 0.
• Single Offtaker Limit:< 35 % of line.
• Liquidity Floor: Cash + undrawn lines ≥ USD 5 million or 10 % of total debt.
• Net-Worth Floor: Prevents equity erosion during price shocks.

Breach triggers cash-sweep control until ratios cure—prompting borrowers to track headroom daily.

6. Risk Mitigation—Credit Insurance and FX Hedges

6.1 Credit Insurance

Political-risk or commercial-credit cover (providers include Atradius and Coface) insures up to 90 % of contract value, with premiums of 40–90 bps for 180-day exposure.

6.2 Foreign-Exchange Hedges

Importers that buy in USD and sell in local currency mitigate FX swings through forwards or non-deliverable forwards matching the bridge tenor. Some lenders mandate hedging of at least 80 % of expected receivables.

7. Timeline: Mandate to First Disbursement

• Day 0 – Mandate: Sign mandate, lodge legal deposit.
• Day 5 – Term-Sheet Locked: Economics and covenants fixed.
• Day 12 – Draft Documents: Facility and security agreements circulated.
• Day 18 – CP Package: Insurance endorsements, board approvals, collateral-manager contract delivered.
• Day 21 – Signing: Execute documents; post interest reserve.
• Day 23–25 – First Draw: Present cargo docs; funds release within two banking days.

Elapsed time: roughly three weeks—faster than syndicated term debt.

8. Worked Example—Crude Cargo Bridge

9. Financely Capability

Financely delivers full-scope structured commodity finance solutions—annual transaction turnover stands at USD 2.6 billion for clients (excluding notes issued). Our team arranges bridge loans, pre-export facilities, borrowing-base revolvers, and off-balance-sheet structures across energy, metals, and agri-bulk flows.