Trade Finance Structuring for Commodity Transactions
Physical commodity trading creates a specific working capital problem. You have agreed to buy and you have agreed to sell. The gap between paying your supplier and collecting from your buyer is where most traders stall. The right trade finance structure closes that gap without tying up your own capital or exposing you to counterparty risk you cannot absorb.
Financely structures and places trade finance for commodity transactions across agricultural products, metals, energy, and chemicals. We assess your transaction, select the right instrument, and manage the lender relationship from first contact through to funding.
Who This Is For
Our commodity trade finance structuring service is designed for physical traders, importers, exporters, and commodity intermediaries who have a confirmed transaction and need to bridge the working capital gap between supplier payment and buyer collection. We work with companies at the transactional stage, not companies exploring whether trade finance exists.
- Physical commodity traders with a confirmed purchase and sale
- Importers who need to pay a foreign supplier before receiving goods or resale proceeds
- Exporters waiting on buyer payment after shipment
- Intermediaries running back-to-back trades with a buyer LC in hand
- Traders closing multiple deals per month who need a revolving facility rather than transactional finance
- Producers and processors who need pre-shipment working capital against a confirmed offtake
- Companies who have been declined by their bank and need an alternative route to funding
Post-revenue requirement: We work with companies that have at least one prior completed commodity transaction, whether self-funded or financed. We do not work on speculative or pre-contract transactions where neither the buyer nor the supplier has been confirmed.
The Instruments We Structure and Place
There is no single trade finance instrument that fits every commodity transaction. The right structure depends on which side of the trade the working capital pressure falls on, whether the buyer has issued an LC, the commodity and its storage characteristics, the counterparty profile, and the transaction size and tenor. We assess each of these factors before recommending an instrument.
| Instrument | How It Works | Best Suited For |
|---|---|---|
| Documentary Letter of Credit (DLC) | A bank-issued payment undertaking that pays the seller on presentation of compliant shipping documents. Governed by UCP 600. The buyer's bank commits to paying regardless of the buyer's financial position, provided documents are compliant. | Sellers who need payment certainty on shipment. Buyers who need to control payment against documentary proof of delivery. New trading relationships where open account terms are not appropriate. |
| Back-to-Back LC | The buyer issues a master LC in favour of the trader. The trader uses that LC as the basis for a second LC issued to the supplier. Two independent instruments. The trader manages the document chain and invoice substitution between them. | Intermediary traders who have a buyer LC in hand but need to pay their supplier by LC without deploying their own working capital. Particularly useful where the master LC cannot be transferred. |
| Pre-Shipment Finance | Working capital advanced against a confirmed purchase order or buyer LC before goods are shipped. Funds the procurement, processing, or production cost. Repaid from buyer proceeds after shipment and document presentation. | Exporters and producers who need to fund the cost of goods before they can ship. Traders who have received a confirmed order but cannot pay their supplier without external finance. |
| DLC Discounting | The seller holds a usance LC from the buyer. After shipment and document presentation, the accepted draft or deferred payment undertaking is discounted with a bank or finance provider, releasing cash before the usance period expires. | Exporters holding usance LCs who need immediate cash rather than waiting 30 to 180 days for the payment date. Traders who have shipped and presented clean documents but face a cash flow gap before buyer payment arrives. |
| Inventory Finance | A lending facility secured against physical commodity stock held in a warehouse under a collateral management agreement. The lender advances a percentage of the inventory value. The facility is repaid as goods are sold and proceeds collected. | Traders who hold physical inventory between purchase and sale and need to release the working capital tied up in that stock. Requires a recognised CMA provider and a liquid, storable commodity. |
| Borrowing Base Facility | A revolving credit facility where available credit scales automatically with the value of eligible receivables, inventory, and confirmed purchase orders. Removes the need for a new approval on each transaction. Draws and repays continuously as the trading book moves. | Traders closing multiple commodity deals per month who need a standing facility rather than transactional finance. The transition from deal-by-deal financing to a revolving line that scales with the business. |
| Receivables Finance | Post-shipment finance against outstanding invoices owed by the commodity buyer. The lender advances against the receivable, the trader receives cash immediately, and the lender collects from the buyer at the invoice due date. | Traders and exporters selling on open account terms to creditworthy buyers who need to convert outstanding receivables into immediate working capital without waiting for the buyer's payment cycle. |
| Prepayment Finance | A lender advances funds to a commodity producer or trader against a confirmed offtake agreement covering multiple future deliveries. Repayment is structured as a deduction from each delivery rather than a lump sum, matching the cash flow profile of the underlying production or trading cycle. | Producers and traders with a confirmed offtake who need working capital against a contracted revenue stream. Common in agricultural, mining, and energy transactions with a recurring delivery schedule. |
How We Select the Right Structure for Your Transaction
The instrument selection process starts with the transaction, not with a product. We assess five factors before making a structuring recommendation. Each one affects which instruments are available and which are most efficient for your specific situation.
Where the Working Capital Gap Falls
Pre-shipment gaps, where you need to pay the supplier before shipping, require different instruments from post-shipment gaps, where you have shipped but are waiting on buyer payment. Some transactions have gaps on both sides simultaneously. Identifying the precise gap determines the instrument type before any other assessment is made.
The Buyer's Payment Method
Whether the buyer has issued an LC, is paying on usance terms, or is on open account determines which instruments are available. A confirmed LC from the buyer opens up back-to-back structures and DLC discounting. Open account terms shift the focus to receivables finance or SBLC-backed arrangements. The buyer's payment method is the starting point for instrument selection.
Counterparty Profile and Verifiability
The creditworthiness and verifiability of both the buyer and the supplier affect which lenders will consider the transaction and at what terms. A buyer LC from a well-rated bank in a stable jurisdiction is a different security profile from an open account receivable from a private company in a frontier market. We assess both counterparties as part of the structuring process.
Commodity Type and Storage Characteristics
Liquid, standardised commodities traded on recognised exchanges are easier to finance than bespoke or perishable goods. Soft commodities, base metals, and energy products have established collateral management frameworks. Specialised industrial goods or commodities with short shelf lives require different collateral arrangements. Commodity type shapes both instrument selection and lender appetite.
Transaction Size and Frequency
A single transaction of $2M and a monthly trading book of $10M require fundamentally different financing approaches. One-off or infrequent trades are suited to transactional instruments: individual LCs, pre-shipment advances, or receivables discounting. Recurring trades at consistent volumes are better served by a revolving facility that scales with the book and removes per-deal friction.
Timeline and Urgency
Every trade finance structure has a minimum realistic timeline from first contact to funds available. A transaction with a supplier payment due in four days has different options from one with three weeks of runway. We assess the timeline against available structures at the outset and advise honestly if the window is too tight for a given instrument. Starting the financing conversation early is always the most important structural decision a trader can make.
Commodities We Finance
We work across the major physical commodity sectors. The list below covers the commodity types where we have active lender relationships and established deal flow. If your commodity is not listed, submit your deal and we will advise whether we can assist.
Agricultural Commodities
Grains and cereals including wheat, corn, rice, and sorghum. Oilseeds including soybeans, sunflower, and palm. Sugar, coffee, cocoa, and cotton. Processed agricultural products including flour, vegetable oils, and feed ingredients. Fertilisers and agricultural inputs.
Metals and Mining Products
Base metals including copper, aluminium, zinc, nickel, and lead. Ferrous metals including iron ore, steel billets, and scrap. Precious metals including gold and silver. Industrial minerals and ores. Metal concentrates and refined products.
Energy and Petrochemicals
Crude oil and refined petroleum products including diesel, fuel oil, and jet fuel. LPG and LNG. Petrochemical feedstocks and derivatives. Coal and coke. Bitumen and asphalt. Carbon credits and environmental commodities on a case-by-case basis.
Chemicals and Industrial Products
Bulk chemicals including caustic soda, sulphuric acid, and urea. Polymers and plastics. Rubber and rubber products. Timber and wood products. Cement and construction materials for commodity-scale transactions.
What the Structuring Process Looks Like
Our process is designed to move from initial submission to a concrete structuring recommendation and lender introduction as quickly as possible. We do not run lengthy onboarding processes before engaging with the substance of a transaction.
- Submit your deal. Use our deal submission page to provide the core transaction details: commodity, counterparties, amount, timeline, and any existing documents. The more complete your submission, the faster we can assess and respond.
- Initial assessment. We review your transaction within one business day and assess which instruments are available, which lenders are likely to have appetite, and whether any structuring work is needed before an introduction can be made.
- Structuring recommendation. We provide a written structuring recommendation covering the recommended instrument, the security package required, the documentation needed, and the realistic timeline to funding. If the transaction needs to be restructured to be bankable, we explain what changes are required and why.
- Lender introduction. Once the structure is agreed and the documentation package is in order, we introduce the transaction to matched lenders from our network. We manage the introduction process and remain available to both sides throughout due diligence.
- Documentation and close. We assist with the documentation process through to funding, helping resolve any conditions, supporting the KYC process, and ensuring the transaction reaches financial close rather than stalling in due diligence.
What you do not need to do: You do not need to identify the right lender, understand which instrument fits your transaction, or know how to present a deal to a credit desk. That is what we do. Your job is to provide accurate, complete information about your transaction. Our job is to turn that into a funded deal.
What We Need From You to Get Started
The faster you provide the following information, the faster we can assess your transaction and make a structuring recommendation. You do not need all of this at the point of first contact, but the more you can provide upfront, the more specific and actionable our initial response will be.
Transaction Basics
Commodity type and specification. Quantity and unit price. Total transaction value. Origin country and destination country. Incoterms. Proposed shipment date.
Counterparty Details
Buyer company name, country of incorporation, and any available evidence of creditworthiness. Supplier company name, country, and production or sourcing capacity. Any existing trading history between the parties.
Financing Requirement
How much financing is required. Which side of the trade the gap falls on: pre-shipment, post-shipment, or both. Whether the buyer has issued or is prepared to issue a letter of credit. The required tenor.
Existing Documents
Signed purchase contract or letter of intent. Signed sale contract or confirmed purchase order. Any LC already issued or in draft. Inspection arrangements confirmed or in progress. Insurance arrangements in place or quoted.
On timing: Trade finance structures have a minimum realistic processing time that cannot be compressed regardless of commercial urgency. If your supplier payment or LC expiry is fewer than ten business days away, tell us immediately when submitting so we can assess whether the window is workable and, if not, advise on interim options. Do not withhold timeline pressure from the initial submission.
Further Reading
If you want to understand more about how specific instruments work before submitting your transaction, the following guides cover each one in depth.
How Back-to-Back Commodity Trades Are Financed
A full explanation of how back-to-back LC structures work for intermediary traders, including the document chain, timing risks, and invoice substitution process.
Pre-Shipment Finance Explained
How to get funded before goods leave the warehouse, including LC-backed packing credit, purchase order finance, and inventory finance against goods in production.
Documentary Letters of Credit
How DLCs work, the types available, the document requirements, and the most common discrepancy errors that delay or block payment.
How to Discount a DLC Issued by Your Buyer
The mechanics of usance LC discounting, how the discount rate is calculated, and what documents the discounting bank requires before advancing funds.
Borrowing Base Facilities for Commodity Traders
How to transition from transactional to revolving finance, how borrowing base calculations work, and when a standing facility makes more sense than deal-by-deal funding.
How to Structure a Commodity Finance Deal
The five building blocks of an approvable commodity finance structure and how to present a transaction to a lender in a format that produces a credit decision rather than a list of questions.
Submit Your Commodity Transaction
If you have a confirmed commodity trade and need financing, submit your deal through our request for quote page. We review every submission, assess the transaction against available instruments and lender mandates, and revert with a structuring recommendation within one business day. No upfront fees. No commitment required before you receive a response.
Frequently Asked Questions
What commodity transaction size do you work with?
Our minimum transaction size is $500,000. There is no hard upper limit, though very large transactions above $100M may require syndicated or club structures that extend the timeline. Most of the transactions we work on fall between $1M and $50M per deal.
Do I need an existing bank relationship to access commodity trade finance?
No. A significant proportion of the lenders in our network are non-bank specialty finance providers who do not require a pre-existing banking relationship. What matters is transaction quality: verified counterparties, a clear repayment mechanism, adequate collateral, and complete documentation.
How quickly can a commodity trade finance facility be put in place?
For a straightforward transactional structure with clean KYC and complete documentation, ten to fifteen business days from first contact to funds available is a realistic target. More complex structures or those requiring legal documentation take longer. Starting early is the most important variable in the timeline.
What if my bank has already declined my transaction?
A bank decline does not mean the transaction cannot be financed. Banks decline for specific reasons, including counterparty geography, commodity type, ticket size below their minimum, or credit line constraints that have nothing to do with the quality of the trade. Non-bank lenders in our network often have appetite for transactions that fall outside a bank's current parameters.
Do you work with first-time commodity traders?
We work with companies that have at least one prior completed commodity transaction. A first-time trader with a confirmed buyer LC, a verified supplier, third-party inspection, and a clean document chain can access finance. The weaker the track record, the stronger the transaction controls need to be to compensate.
What does Financely charge for commodity trade finance structuring?
Our fees are success-based and are agreed transparently before any lender introduction is made. We do not charge upfront advisory or retainer fees for commodity trade finance structuring. You do not pay until a transaction closes, and the fee structure is explained clearly as part of our initial assessment response.
Ready to Structure Your Transaction?
Submit your commodity transaction details and receive a structuring assessment within one business day. If your transaction is fundable, we will tell you which instruments apply, which lenders have appetite, and what documentation you need to move forward.
Disclaimer: Financely operates as a finance advisory and deal origination platform. We do not provide regulated investment advice or act as a credit intermediary under applicable lending regulations. All financing decisions are made independently by lenders based on their own credit assessment and due diligence. Transaction timelines, lender appetite, and instrument availability vary by deal, commodity, jurisdiction, and market conditions. Obtain independent legal and financial review before committing to any financing arrangement.