What Is Structured Trade Finance?

Structured trade financing refers to short-term financing issued by banks as exporters of commodities by way of collateral or pledge with the commodity rights they have held or will hold in the future.

Structured trade finance

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Structured trade financing refers to short-term financing issued by banks as exporters of commodities by way of collateral or pledge with the commodity rights they have held or will hold in the future.

1.Account receivables financing

Receivables financing means that the exporter transfers the export contract and accounts receivable to the bank as a guarantee after the shipment. The bank provides recourse financing to the exporter, and the importer pays directly to the bank's special account when paying (may be Payment in installments) as repayment by the exporter.

2.Inventory Financing

Inventory financing means that the exporter guarantees the goods stored in the warehouse (usually designated by the bank) and relies on the payment of the importer as the source of repayment. Unlike the receivables financing, when the exporter finances, the goods have not yet shipped out. But the repayment method is the same as the receivables financing, which is the funds recovered after the goods are exported, so the inventory financing must include the management of the receivables.

3. Warehouse Receipt Financing

The so-called warehouse receipt is the receipt filled out by the custodian of the warehousing contract when the warehousing goods delivered by the custodian are received by the custodian. The warehouse receipt is not only a proof of receipt by the custodian, but also a valid proof of withdrawal by the depositor. Warehouse receipt financing means that after the exporter stores the goods in the warehouse (usually designated by the bank), the warehouse will issue the warehouse receipt to the bank to pledge to obtain funds. The warehouse must deliver the goods according to the bank's instructions.

The Relationship between Structured Trade Finance and Transactional Trade Finance

Transactional trade financing is more focused on providing financing for a certain link in trade, while structured trade financing is more focused on using goods as collateral or future rights of goods as collateral. For example, package loans are for preparation before production and the production process, and export bills are for financing after the shipment of goods; while structured trade financing focuses on the preservation of goods or the realization of future rights. Different, it may involve futures trading, so structured trade financing is often financing of commodities.