What is Contract-Backed Trade Finance?
What is Contract-Backed Trade Finance?
In international trade, liquidity gaps often occur between signing a sales contract and receiving payment. Contract-backed trade finance fills that gap. It allows companies to secure short-term funding against purchase orders, confirmed sales contracts, or offtake agreements with creditworthy buyers. This type of financing ensures that exporters and distributors can fulfill obligations without straining their own working capital.
How Contract-Backed Trade Finance Works
The financing is structured around the strength of the buyer’s commitment. A lender advances funds (typically 70–85% of the contract value) against the purchase order or contract. The exporter or distributor uses those funds to pay suppliers, cover logistics, or finance production. Once the buyer pays the invoice, the facility is settled, and the transaction closes.
Because repayment depends on the buyer’s payment rather than the seller’s balance sheet alone, this tool is particularly powerful for companies that are asset-light but have strong demand pipelines.
Why Businesses Use It
- Liquidity when needed: Receive funds as soon as contracts are signed.
- Scalable with sales: Larger order book means more financing capacity.
- Risk-sharing: Lenders assess the buyer’s creditworthiness, reducing reliance on the seller’s balance sheet.
- Operational flexibility: Finance suppliers, logistics, and production without waiting for customer payment.
Industry Applications
Contract-backed trade finance is widely used in commodities, agriculture, manufacturing, and distribution. Exporters in Africa, Asia, and Latin America often rely on it to bridge seasonal cash flow gaps, while distributors in developed markets apply it to manage large supply contracts without increasing bank debt.
Arrange Contract-Backed Trade Finance
Financely underwrites and distributes contract-backed trade finance facilities through our global lender network. Submit your contracts and receive a preliminary term sheet tailored to your transaction.
Contact UsFinancely acts as an arranger and advisor. All transactions are subject to counterparty due diligence, lender approval, and compliance requirements. Terms and advance rates depend on contract size, jurisdiction, and buyer creditworthiness.
Get Started With Us
Submit Your Deal & Receive a Proposal Within 1-3 Working Days
Submit your deal using our secure intake form, and receive a quote within 1-3 business days. Existing clients can connect with their relationship manager through our secure web portal.
All submissions are
promptly reviewed, and all communications are conducted through the intake form or the client portal for a seamless and secure process.
Thank you for considering working with us. A nominal fee of US$500 is required upon completion of each form. This fee covers the time and effort we invest in reviewing your submission and crafting a thorough proposal. We receive numerous inquiries and prioritize those that carry this fee, ensuring serious applicants receive prompt attention.
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Tap into solutions like letters of credit, bank guarantees, and payment facilitation. We address the challenge of global transaction risk through structured strategies that foster cross-border growth. Complete the form to unlock streamlined funding aligned with your commercial objectives.
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Submit a RequestOnce we receive your submission, our team will review your information to determine feasibility. If eligible, you will receive a proposal or term sheet within 1–3 business days. Visit our FAQ and Procedure pages for more information.
Disclaimer: Financely provides financing based on due diligence and feasibility. Approval is not guaranteed, and past performance does not predict future outcomes. All terms are subject to review. Financely primarily assists with structuring and distribution. Qualified parties carry out the project if the client approves the proposal.
