Trade Finance

Trade Finance Capital Raising Methodology

Table Of Contents

1. Introduction And Context
2. Scope And Operating Model
3. Standard Operating Procedure: Five Step Close
4. Underwriting Detail And Materials
5. Gap Financing: Purpose, Controls, And Execution
6. Facility Mechanics: DLC, UPAS, SBLC, Issuance On Behalf Of Client
7. Program Structures: SPV, Trustee, And Securitization
8. Distribution Process And Bankability Criteria
9. Fees And Retainer Coverage
10. Client Benefits
11. FAQ
12. Glossary

Introduction And Context

Many capable exporters and distributors face a financing gap. Suppliers ask for cash in advance or confirmed instruments. Buyers demand terms. Insurance policies do not align with wording. Documentation is incomplete or inconsistent. The result is delayed shipments and lost margins. Financely addresses this by producing decision grade materials, aligning documentation with risk, and placing facilities with regulated issuers and lenders in a controlled sequence.

Scope And Operating Model

Coverage includes DLC at sight and UPAS, SBLC under ISP98, confirmations, reimbursements, receivables and supply chain programs, and short tenor gap bridges. Financely acts as advisor and arranger. Issuance is performed by regulated banks. For recurring flows the structure can be migrated into an SPV with a professional trustee, blocked accounts, eligibility criteria, and documented cash waterfalls. All work is coordinated through the client portal with a single channel for decisions and records.

Standard Operating Procedure: Five Step Close

1. Engagement And Retainer: mandate executed, retainer received, data room checklist released, target timetable agreed.
2. Underwriting: KYC and sanctions screening, financial analysis, trade flow mapping, insurance validation, draft wording prepared, issuer and lender short list produced.
3. Term Sheet: structure, pricing ranges, covenant map, conditions precedent, collateral and control package, draw mechanics, and reporting cadence.
4. Allocation And Documents: issuer or lender allocation issued, drafts cleared with counterparties, conditions precedent satisfied, funds flow confirmed in writing.
5. Issuance And Settlement: LC or SBLC issued, confirmations set where required, advising and reimbursement instructions executed, settlement and reporting initiated.

Underwriting Detail And Materials

Underwriting produces a bankable file. Required components include audited and management financials, AR and AP aging, shipment norms, inspection regime, insurance endorsements, customer performance data, sources and uses, working capital model, and covenant forecast. Financely engages specialist contractors where needed. The bench includes former bank trade heads, LC documentation counsel, securitization trustees, and analysts with Big Four training. Materials are prepared to a consistent standard that supports allocation and legal drafting without rework.

Gap Financing: Purpose, Controls, And Execution

Gap financing addresses near term shortfalls that block issuance or scale. Typical drivers include cash margin required by the issuing bank, pre shipment costs before DLC proceeds recycle, and equity deficits during ramp up. The objective is continuity of trade while maintaining lender protection and payment discipline.

Sources. Private credit lines against assignment of proceeds and control accounts. SBLC backed bridges subject to issuer and wording tests with appropriate haircuts. Receivables advance via true sale into an SPV that purchases invoices under eligibility rules. UPAS structures that deliver sight funds to suppliers while tenor sits with buyers. Preferred equity at SPV or holding company where coverage supports it.

Control Package. Blocked collection accounts, escrow waterfalls, step in rights, inspection and presentation tests, concentration limits, and trustee monitoring. These controls establish first access to cash flows, reduce leakage, and improve advance rates.

Execution Path. Quantify the shortfall and tenor. Map sources and uses by shipment. Define collateral and ranking. Issue a Gap Term Sheet with advance rate, pricing, covenants, and reporting. Seek indications from the panel. Settle intercreditor arrangements where a senior LC facility exists. Document, perfect security, agree funds flow, draw, and monitor. Repayment uses assigned LC proceeds, receivable collections, or escrow traps as specified in the waterfall.

Facility Mechanics: DLC, UPAS, SBLC, Issuance On Behalf Of Client

• DLC And UPAS. Supplier receives sight funds. Buyer pays at tenor. Inspection and presentation rules are fixed in the LC and in the commercial contract. Reimbursement and advising instructions are confirmed in writing.
• SBLC Under ISP98. Draw events are defined precisely. When used for borrowing, lenders apply issuer tests, wording tests, and haircuts. The structure specifies notices, cure periods, and draw documentation.
• Issuance On Behalf Of Client. The applicant can be the operating company or an SPV. Financely coordinates the issuing bank, advising bank, confirming bank, and any reimbursing bank. Funds flow is documented to the account level and reconciled post settlement.

Program Structures: SPV, Trustee, And Securitization

For predictable volumes the facility migrates to a program. Receivables are sold to an SPV under true sale. A professional trustee holds security and enforces the waterfall. Senior and subordinated notes can be issued where scale and reporting justify it. Eligibility criteria, concentration limits, dilution reserves, and performance triggers protect senior investors. Equity or junior funding can be provided by sponsors or third party investors to meet advance rate requirements and to stabilize liquidity.

Distribution Process And Bankability Criteria

Distribution is targeted. We approach a defined panel that fits ticket size, jurisdiction, sector, and tenor. Indications are collected in a comparable format that captures fees, rates, covenants, baskets, and conditions precedent. Shortlists move to documentation with consistent messaging across parties. A transaction is bankable when counterparties are verified, cash conversion is evidenced, insurance is enforceable, instrument wording matches risk, and tranche sizes reflect real flows.

Fees And Retainer Coverage

Retainer. Funds underwriting, draft wording, issuer and lender engagement, data room build, timetable control, and decision logs. Bank And Legal Costs. Paid at cost against estimates. Success Fee. Payable on issuance or funding as agreed in the mandate. Retainers are not refundable once underwriting begins. The firm does not operate on pay after delivery or escrow only expectations.

Client Benefits

FAQ

Can issuance proceed without the full cash margin
Possible where bank credit permits or where a gap bridge is arranged against assignment of proceeds with control accounts and defined covenants. Advance rates reflect issuer quality, tenor, and documentation.

Can an SBLC be borrowed against at par
No. Lenders apply issuer tests, wording tests, jurisdiction screens, and then apply a haircut. The bridge is sized to the lower of these constraints.

Will you send MT799 before the retainer and underwriting
No. Allocation follows underwriting, cleared drafts, and conditions precedent. Comfort messages without process increase compliance risk and reduce the probability of allocation.

Can we issue through an SPV and bring equity
Yes, subject to tax and bank policy. Equity can sit at SPV or holding company level. Intercreditor terms and the waterfall are documented with the trustee to protect ranking and settlement.

What typically delays closing
Incomplete data rooms, weak or unverified counterparties, non compliant insurance language, late legal review, and late changes to commercial terms.

Do you guarantee funding
No. Outcomes depend on credit quality, structure, documentation, and market appetite. Mandates are accepted where the file can be defended in front of decision makers.

Glossary

Advance Rate. Percentage of collateral, proceeds, or eligible receivables that a lender will advance.

Advising Bank. Bank that authenticates and advises an LC or SBLC to the beneficiary.

Assignment Of Proceeds. Direction of LC or SBLC proceeds to a controlled account for repayment.

Blocked Account. Bank account controlled by a lender or trustee through an account control agreement.

Borrowing Base. Formula that sets availability against eligible receivables or inventory under a program.

Conditions Precedent. Requirements that must be satisfied before issuance or funding.

Confirmation. Additional undertaking by a confirming bank that removes country or bank risk from the beneficiary.

DLC. Documentary letter of credit with defined presentation and inspection rules under UCP 600.

Dilution. Reductions to receivable balances due to credit notes, returns, or disputes. Managed through reserves.

Eligibility Criteria. Rules that define which receivables qualify for funding or securitization.

Evergreen Clause. Automatic renewal language in an SBLC or policy, subject to notice periods.

Haircut. Discount applied when advancing against collateral or SBLC rights.

Intercreditor. Agreement that sets ranking, enforcement, and waterfall among finance parties.

Issuing Bank. Bank that undertakes to honor an LC or SBLC issued for the applicant.

MT799. Free form SWIFT message. Not a payment or a binding undertaking. Used only after process controls are met.

Presentation. Delivery of documents that comply with LC terms for payment at sight or at maturity.

Reimbursement. Bank to bank settlement instructions for an LC.

Servicer. Party that manages receivables and reporting to defined standards under a program.

SPV. Special purpose vehicle that holds assets and issues notes. Paired with a trustee and control accounts.

Trustee. Independent party holding security and enforcing the waterfall for investors and lenders.

True Sale. Legal transfer of receivables to an SPV so risk and cash flows pass to the SPV.

UPAS. Usance paid at sight. Supplier receives sight funds. Buyer pays at tenor to the reimbursing bank.

Waterfall. Ordered priority of cash to fees, interest, principal, reserves, and releases.

Financely is a capital advisory. The firm is not a bank. All outcomes are subject to KYC and AML, credit approval, documentation, and jurisdictional requirements. Work proceeds on a retained basis through the client portal.