Trade Finance Facility Term Sheet Explained
Financely structures trade finance facility term sheets for companies seeking lender-ready documentation. The term sheet sets out the facility size, permitted use, tenor, collateral, advance rates, pricing, reporting, covenants and repayment mechanics before full underwriting begins.
A trade finance term sheet is the commercial framework for a proposed facility. It tells the borrower, lender, credit committee and legal counsel how the financing should work. A weak term sheet creates confusion. A strong term sheet turns the trade request into something a lender can analyze.
For importers, exporters, distributors and commodity traders, the term sheet should connect the facility directly to the trade cycle. That means supplier payments, inventory, shipping documents, receivables, buyer collections and repayment timing should all be clear.
What A Trade Finance Term Sheet Covers
Facility Type
Revolving trade line, borrowing base facility, LC-backed line, receivables facility, inventory facility or structured commodity finance facility.
Facility Size
Requested limit, draw mechanics, transaction sublimits, LC sublimits, seasonal increases and any proposed accordion capacity.
Collateral Package
Receivables, inventory, goods in transit, assignment of proceeds, account control, guarantees, insurance and warehouse controls.
Repayment Source
Buyer collections, receivable proceeds, inventory sale proceeds, offtake payments, LC reimbursement or controlled cash waterfall.
Key Term Sheet Clauses
| Clause | What It Defines | Why It Matters |
|---|---|---|
| Borrower And Obligors | The borrowing entity, guarantors, affiliates and security providers. | Lenders need legal clarity on who owes money and who grants collateral. |
| Use Of Proceeds | Supplier payments, inventory purchases, shipping, duties, receivables takeout or LC margin. | Prevents facility proceeds from drifting into unrelated corporate use. |
| Advance Rates | Percentages applied to eligible receivables, inventory or assigned proceeds. | Sets borrowing availability and protects the lender from collateral shortfall. |
| Conditions Precedent | Documents required before closing or before each draw. | Forces the borrower to deliver the information needed for approval and funding. |
Pricing, Fees And Tenor
The term sheet should state the interest rate, arrangement fee, legal cost treatment, commitment fee, monitoring fees, LC commissions, default pricing and any renewal fees. For revolving trade finance, the tenor may include a facility maturity date and separate maximum draw periods for each transaction.
A lender can decline a strong trade if the pricing, collateral, tenor and reporting terms are poorly drafted. The term sheet must balance borrower usability with lender control.
Reporting And Covenants
Trade finance lenders usually require recurring reporting. That may include borrowing base certificates, receivables aging, inventory reports, bank statements, buyer collections, shipment status, insurance updates and covenant compliance certificates.
Covenants may cover minimum liquidity, maximum leverage, borrowing base compliance, permitted debt, restricted payments, buyer concentration, inventory location, insurance, sanctions compliance and notice requirements for disputes or payment delays.
The most common mistake is asking for a facility amount without showing the lender how the limit is supported by collateral, margin, repayment timing and reporting discipline.
Where Financely Fits
Financely prepares trade finance term sheet architecture before lender discussions. Our work includes facility sizing, collateral logic, use-of-proceeds design, borrowing base mechanics, covenant mapping, repayment route analysis and lender-facing credit positioning.
This helps borrowers approach lenders with a structured proposal instead of a raw funding request. It also helps lenders review the transaction faster because the commercial terms, risk controls and financing logic are already organized.
Structure A Trade Finance Term Sheet
Share your requested facility amount, trade cycle, collateral, buyer list, supplier contracts, receivables, inventory and repayment plan. Financely will structure the term sheet framework and prepare the file for lender review.
FAQ
What is a trade finance facility term sheet?
It is a document that summarizes the proposed commercial terms of a trade finance facility before full underwriting and legal documentation.
Is a term sheet binding?
Most term sheets are non-binding except for selected provisions such as confidentiality, costs, exclusivity or governing law, depending on drafting.
What should the term sheet include?
It should include facility type, size, tenor, pricing, collateral, advance rates, use of proceeds, conditions, reporting, covenants and repayment mechanics.
Can Financely structure the term sheet?
Yes. Financely structures trade finance facility term sheets and prepares lender-ready files for borrower review and capital provider distribution.
Financely is a transaction-led corporate finance advisory firm. Term sheet preparation does not guarantee financing approval, facility size, pricing, advance rate, collateral treatment or closing. All financing remains subject to lender underwriting, KYC, AML, sanctions checks, credit approval and final legal documentation.