Public Commentary: This post is not sponsored. It addresses professional investors and originators. Nothing here is investment advice or an offer to arrange funding.
How to Attract Private Capital for Trade-Finance Deals
Banks still dominate short-tenor trade paper, yet balance-sheet and regulatory limits open room for private credit. Yields above money-market rates, self-liquidating collateral, and low duration create a story many allocators want to hear—if the facts are presented clearly. This guide maps the steps from first teaser to funded warehouse.
Guide Navigation
1. Investor Value Proposition
- Yield: Net coupons of SOFR/EURIBOR + 400-700 bps for investment-grade supply chains are common.
- Duration: 30-120-day average life keeps interest-rate exposure contained.
- Self-Liquidation: Receivables or inventory convert to cash, shrinking exposure without selling assets.
- Collateral Insight: Trade documents, shipment tracking, and obligor payment history back every draw.
2. Structuring Toolkit
| Feature | Why It Matters | Typical Terms |
|---|---|---|
| Note Issuer SPV | Isolates assets and protects noteholders from originator insolvency | Orphan trust or charitable SPV, bankruptcy-remote covenants |
| Borrowing Base | Limits advance rate to a % of eligible receivables or inventory | Advance rate 70-90 %; concentration caps by buyer & country |
| Liquidity Reserve | Covers timing gaps and potential dilution | 3-5 % of outstanding pool in cash or standby LC |
| Credit Insurance / ECA Cover | Transfers obligor or country default risk to insurers | Single-risk or portfolio cover; 90-95 % indemnity |
| Subordination | First-loss cushion reassures senior noteholders | 5-15 % junior tranche or over-collateralisation |
3. Risk Controls Investors Demand
- KYC & Sanctions: Full counter-party screening plus watch-list monitoring.
- True Sale Opinion: Legal opinion confirming receivables transfer stands up in borrower insolvency.
- Collateral Audit: Third-party checks on invoices, purchase orders, warehouse receipts.
- Performance Triggers: Automatic amortisation if defaults or delinquencies breach set limits.
- Reporting: Weekly asset tapes, monthly investor reports, real-time dashboard for large deals.
4. Core Documents & Data Pack
- Information Memorandum: Portfolio stats, historic loss curves, track record of originator.
- Note Purchase Agreement: Pricing grid, eligibility tests, amortisation rules.
- Servicing Agreement: Cash-application timeline, lockbox control, audit rights.
- Insurance Policies: Assignments to SPV and loss-payee endorsements.
- Legal Opinions: True sale, security perfection, enforceability under governing law.
5. Execution Timeline
| Phase | Main Tasks | Typical Duration |
|---|---|---|
| Teaser & NDA | Outline pool, jurisdiction, target size; sign confidentiality | 1 week |
| Data Room & Indicative Terms | Upload tapes, policies, legal structure; receive price talk | 2-3 weeks |
| Diligence & Definitive Docs | Audit, legal opinions, insurance confirmations | 4-6 weeks |
| Funding & First Borrowing Base | Sign agreements, settle notes, start draw process | 1 week |
Next Step
Private credit is ready to fund well-structured trade pools. Contact FG Capital Advisors to test your deal against investor benchmarks and receive a term-sheet outline.
This guide is informational. Always secure independent legal, tax, and accounting advice before executing any funding structure.
