What Is Short‑Duration Trade Finance?
What Is Short‑Duration Trade Finance?
Short‑duration trade finance (SDTF) is secured working capital that turns with the cargo. Money goes out to fund goods already sold forward; cash comes back when the buyer pays, usually inside 60‑180 days. Because the loan lives only as long as the shipment, credit exposure shrinks fast, and lenders anchor risk to real assets, not forecasts two years out.
1. Core Definition
SDTF covers short, self‑liquidating facilities tied to confirmed purchase‑and‑sale or tolling contracts. Each draw funds inventory, freight, export duty, or margin calls needed to move a defined batch of commodities or finished product. Repayment waterfalls are locked: proceeds from the end buyer sweep first to retire principal and agreed return.
2. Typical Cash Cycle
- Borrower secures a sales contract and price hedge.
- Lender advances against collateral: warehouse receipts, cargo in transit, or receivables.
- Goods ship; inspectors track quantity and quality.
- Buyer remits into pledged collection account; loan repays in one hit.
3. Where It Fits vs Other Funding
Compared with unsecured revolvers, SDTF is ring‑fenced to specific flows and is sized off cargo value. Compared with long‑dated project loans, it recycles capital several times per year. Compared with letters of credit alone, SDTF delivers cash, not just bank paper, while often sitting senior to local bank exposure.
4. Risk Controls Lenders Expect
- First claim on title docs and export proceeds.
- Insurance (marine, political, in some cases credit) naming the security agent.
- Daily mark‑to‑market and margin calls when loan‑to‑value breaches 85%.
- Right to stop‑ship or divert cargo on covenant breach.
5. Investor Angle: Why SDTF Attracts Capital
Short tenor helps manage duration and reinvestment risk. Deals aim for mid‑single to low‑double digit USD yield with low correlation to listed credit once collateral and price hedges sit in place. Loss history for disciplined managers remains low because problems surface early in the voyage or warehouse stage, when collateral is easiest to control.
6. When Borrowers Should Use SDTF
- Supplier pre‑payment windows are tight and banks demand heavy cash cover.
- Seasonal stock builds (harvest, winter fuel) strain lines.
- Margins are locked in but cash sits trapped in transit.
- New trade routes lack historical limits at relationship banks.
7. Common Deal Terms
| Item | Range |
|---|---|
| Facility Size | USD 3m‑30m |
| Tenor | 60‑180 days |
| Advance Rate | up to 85% of cost or confirmed sale value |
| Pricing | SOFR + 500‑800 bps or fixed 8‑11% p.a. equiv. |
| Security | Cargo pledge, receivable assignment, account control |
| Also Called | short‑term trade finance loans; self‑liquidating trade lines |
8. Financely: Short‑Duration Trade Finance Desk
We arrange SDTF lines for commodity traders, processors, and importers that need fast, collateral‑smart capital. Our team maps trade flows, assembles the collateral stack, introduces issuing and participating lenders, and monitors positions until cash clears. Investors can access the flow through pooled commitments or deal‑by‑deal tickets screened for collateral coverage, tenor discipline, and ESG screens tied to UN SDGs.
Need short‑cycle liquidity or looking to add secured SDTF yield to a portfolio? Send the trade pack or investor enquiry and we’ll respond inside one business day.
Contact FinancelyInformation is general and not an offer of securities. Terms vary by deal; capital at risk. Qualified purchasers should request full materials before committing funds.
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