Notice. This article is informational and general in nature. Any transaction remains subject to counterparty acceptability, KYC and AML, sanctions screening, diligence, documentation, security perfection, insurance, and third-party approvals. Obtain independent legal advice for contracts, remedies, and enforceability.
Guide to Structured Commodity Finance
Structured commodity finance is not a generic loan with a commodity label. It is a control-led credit structure designed around physical flow, title, and cash collection, with clear advance rates and reporting that a lender can live with.
If your business has real supply and real buyers, but cash conversion keeps choking growth, structured commodity finance is often the cleanest path to scalable working capital.
Start Client IntakeWhat Structured Commodity Finance Means
Structured commodity finance refers to facilities where repayment is driven by the commodity cycle itself, not by an abstract promise. Lenders focus on control of goods, control of documents, and control of cash. The structure is built so funds move only when the trade flow is consistent with the agreed playbook.
Most mandates fall into repeatable working capital for traders, producers, importers, and processors. Some are single-transaction financings. The difference is not the commodity, it is the repeatability and the control stack.
For service scope, see Structured Commodity Finance Advisory and Structured Trade & Commodity Finance Services.
The Core Building Blocks
Structured commodity finance lives or dies on a few fundamentals. If any of these are weak, the lender either walks, prices it brutally, or demands controls that make the trade unworkable.
| Building Block | What Lenders Want To See | Practical Proof |
|---|---|---|
| Clear title and transfer mechanics | Who owns the goods at each step, who can pledge them, and what happens on default | Contracts, Incoterms, title documents, pledge language, security filings plan |
| Counterparty quality | Credible buyers, credible suppliers, and a history that supports collection | Track record, payment performance, disputes history, concentration analysis |
| Control of inventory | Independent verification and controlled release, not self-reported stock | Collateral manager and warehouse control via a Collateral Management Agreement |
| Control of cash | Collections routed to controlled accounts with sweeps and waterfall logic | Account control terms, assignment of receivables, lockbox, payment instructions |
| Eligibility and reporting | A borrowing base that can be tested weekly or monthly with reserves | Borrowing base design and facility mechanics, see Commodity Borrowing Base and Revolving Credit Facility |
| Compliance clearance | KYC, AML, and sanctions screening that holds up to bank standards | Corporate docs, UBOs, trade routes, vessel and port screening, counterparties |
Common Structures
Structured commodity finance is a toolkit. The right structure depends on where the cash gap sits: before shipment, during transit, in storage, or after delivery.
| Structure | What It Funds | Typical Collateral And Controls |
|---|---|---|
| Pre-export finance | Procurement, aggregation, processing, and export prep | Assignment of offtake, inventory control, export docs discipline, cash sweep |
| Borrowing base and revolver | Repeatable working capital against eligible inventory and receivables | Borrowing base certificates, reserves, audits, CMA for stock, see Borrowing Base and RCF Advisory for Commodity Traders |
| Inventory finance | Stock build in bonded or approved warehouses | Pledge of goods, warehouse receipts, controlled release under a CMA, see Non-Bank Trade Finance Lending |
| In-transit finance | Goods on the water or in transit to the discharge port | Title documents, negotiable bills of lading, insurance, documentary triggers |
| Receivables finance and forfaiting style lines | Post-delivery collection gaps | Assignment of receivables, buyer verification, concentration limits, lockbox |
| Repo style structures | Liquidity against commodity inventory with defined repurchase mechanics | Title transfer or tight pledge controls, custody, eligibility haircuts |
| LC and SBLC supported facilities | Risk transfer, performance support, or leverage against acceptable bank instruments | Instrument wording alignment, issuer acceptability, see Trade Finance Term Sheet and SBLC Cost, Collateral and Margin |
Documents That Actually Matter
Lenders do not fund vibes. They fund enforceable rights with a clean operational plan. The documentary set is where most sponsors lose time.
- Trade contracts: purchase and sale contracts, pricing, tolerances, disputes, delivery terms, assignment rights.
- Facility agreement: covenants, conditions precedent, events of default, reporting, audit rights. Start with Guide to Trade Finance Facility Agreements.
- Security and control documents: pledges, assignments, account control, and inventory control. If inventory is central, read Collateral Management Agreements in Trade Finance.
- Shipping and inspection docs: bills of lading, certificates, quality and quantity inspection, insurance certificates.
- Compliance pack: KYC, UBOs, sanctions-relevant touchpoints, trade routes, counterparties, and beneficial ownership proof.
If your main goal is a lender-ready pack and a controlled data room, see Trade Finance Structuring and Fundraising and Trade Finance Structuring & Borrowing Base Design.
Advance Rates, Haircuts, And Why Control Drives Leverage
Sponsors often ask for a simple rule, like “what LTV can I get”. In commodity finance, leverage is a function of control, volatility, liquidity, and enforceability.
Inventory under independent control usually attracts higher advance rates than inventory sitting in the sponsor’s yard. Eligible receivables from strong buyers can support meaningful availability, but concentration and dispute risk reduce it fast. In-transit positions can work, but only when title documents and insurance are clean.
For indicative ranges and typical lender expectations, see Trade Finance Term Sheet.
Commodity-Specific Considerations
Metals
Metals trades usually hinge on quality certainty, logistics discipline, and buyer credibility. Documentary sequencing and inspection standards are non-negotiable.
See Trade Finance for Copper Transactions for an example of how lenders review a tight metals flow.
Refined petroleum products
Lenders focus on sanctions exposure, chain of custody, storage controls, and title clarity. The control stack needs to be explicit.
See Refined Petroleum Products Trade Finance.
Soft commodities
Seasonality, aggregation risk, warehouse performance, and traceability often matter as much as buyer credit. Structures must respect crop cycles and local execution realities.
What Lenders Ask In Underwriting
Expect underwriting to revolve around a short list of questions. If you answer these cleanly, cycles shorten.
- Who are the end buyers, how do they pay, and what is the dispute history.
- Where is the commodity located at each step, and who controls release.
- What documents prove title, quality, and shipment, and how are discrepancies handled.
- What is the borrowing base methodology, reserve policy, and reporting frequency.
- What insurance is in place and who is the loss payee.
- What compliance issues exist in the trade route, counterparties, or jurisdictions.
If you need lender introductions paired with structuring support, see Trade Finance Lender Network for Commodity Traders and Trade Finance Capital Introduction Services.
Common Failure Points
Most deals fail for predictable reasons. Fixing them early saves months.
- Weak title chain: unclear ownership, unclear pledge rights, unclear transfer mechanics.
- Cosmetic controls: no independent verification, no controlled release, no real collateral manager where needed.
- Contract misalignment: trade contract says one thing, LC or facility mechanics say another.
- Overstated leverage: volatility and basis risk ignored, reserves not modeled.
- Compliance surprises: sanctions exposure or beneficial ownership issues discovered late.
How To Prepare A Lender-Ready File
A lender-ready file is a story with evidence. It explains the flow, shows the controls, and makes repayment predictable.
- One-page transaction summary with sources and uses, cycle length, and repayment path.
- Contracts and key docs, signed or near-final.
- Collateral and control plan, including CMA and warehouse arrangements where relevant.
- Borrowing base logic with eligibility, reserves, and reporting cadence.
- Compliance pack ready on day one.
This is the backbone of Structured Trade Finance Advisory Services and Trade Finance Consulting work.
FAQ
Is structured commodity finance only for large trading houses?
No. Mid-market traders, importers, and producers can access it when the flow is real, the controls are credible, and reporting can be maintained. Scale helps, but structure and discipline matter more.
Do I need a collateral manager for every deal?
Not always. If the lender relies on inventory as primary collateral, independent control is often the cleanest solution. If the structure is receivables-driven with strong buyer controls, inventory control may be lighter.
Can LC or SBLC support improve terms?
It can, when the instrument is issued by an acceptable bank and the wording aligns with the trade and facility mechanics. Many failures come from misaligned text. Start with SBLC Cost, Collateral and Margin and Trade Finance Term Sheet.
What is the fastest path to indicative terms?
Submit a clean transaction summary, contracts, counterparties, and your proposed control plan. If the structure is coherent, indicative terms move quickly. If basics are missing, the cycle drags.
Can FG Capital Advisors provide direct lending?
No. FG Capital Advisors provides advisory and arrangement support on a best-efforts basis. Financing is provided by third-party capital providers under their own approvals and documentation.
If you want structured commodity finance that stands up to lender scrutiny, submit your trade flow and documents. We will revert with a scoped structure and next steps.
Start Client IntakeDisclosure. This content is for informational purposes and does not constitute legal, tax, accounting, or financial advice. FG Capital Advisors is not a bank or lender and does not accept client money. Any support is provided on a best-efforts basis and remains subject to third-party approvals, diligence, compliance checks, and documentation.
