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Commodity finance often requires a structured trade facility to generate credit appetite to fund significantly larger transactions that otherwise could not be considered on a traditional lending basis. The level of control exercised by the financier over the use of borrowed monies, constructive possession of the goods and capture of the sales proceeds will be determined by the assessment of the ‘credit gap’.
This chapter describes the structuring of a trade and receivables finance solution across the trade cycle as the goods pass from the stages of pre-shipment payment, warehouse storage, call-off, goods in transit and capture of the trade receivable. The financing ratio and importance of the law of the place is highlighted when security is required over the goods at the place of discharge or while stored in a warehouse.