Structured Trade / Commodities Finance

Structured trade finance (STF) is a funding solution used by distributors and manufacturers in the hard commodity (e.g., metals and mining) and soft commodity (e.g., agricultural crops) sectors. STF products are extended across the supply chain, from raw material purchase to customer delivery, to facilitate trading and / or production activities. CCG works with individual clients to understand their working capital needs and then enables a funding facility to support the corporate’s main line of business.

STF is a specialized form of financing which is seen as an alternative to conventional lending as it uses the underlying cash flows or value of the commodities as the basis for security. Due to the unwavering value of commodities within the supply chain, STF solutions are able to provide financing at various points of raw materials purchase, production, inventory or trade.

There are multiple types of STF however most are self-liquidating structures. As such, the loan is ultimately repaid to the lender through the final sale of the goods to the end customer. Because of this characteristic, STF is heavily structured alongside the supply chain of well-understood 2 party trading relationships. The focus is then on the underlying trade cycles between suppliers and customers with a focus on cross border trade flows that originate in emerging markets.

STF is normally backed by limited recourse trade finance lines, however, the structure aims to provide an enhanced security mechanism, to act as an improvement on the borrower’s position. This is done by segregating assets, which have relatively predictable cash flow attached to them through pricing prediction, from the corporate borrower and using them to mitigate risk and secure credit from a lender. A corporate therefore is essentially borrowing against a commodity’s “expected worth”.