Who this page is for. Physical traders in oil, metals, agri and softs who need working capital and risk-controlled structures. Not legal or tax advice. All financing is subject to KYC/AML, sanctions, collateral, and documentation.
How to Raise Capital for Physical Commodity Traders
Lenders fund flows they can monitor and enforce. Your job is to prove control of cash, title, and risk at every step of the trade cycle. The capital stack starts with banks for short tenors and extends to private credit and notes when you need size or flexibility. Build a pack that shows discipline and real collateral control and you will clear credit.
Who lends
- Relationship banks with trade desks and LC issuance.
- Specialist commodity trade finance funds and confirmers.
- Private credit funds and hedge funds buying secured notes.
- Family offices co-lending behind a bank lead.
Core structures
- Open account. Cheapest and fastest. Mitigate with credit insurance, receivables assignment, tight limits, and escrowed collections.
- Documentary collections. D/P or D/A with banks handling documents. Lower cost than LCs but weaker protection on buyer failure.
- Letters of credit. Sight or usance with confirmation where country or bank risk is high. Consider UPAS to pay supplier at sight and settle at maturity.
Collateral and first loss capital
Banks want hard control. Expect charges over inventory and receivables, pledges over collection accounts, assignment of LC proceeds, control over warehouse receipts and bills of lading, collateral management agreements with reputable surveyors, and insurance naming lenders as loss payee. First loss capital from sponsors or a junior tranche absorbs early losses and unlocks higher senior limits or better pricing. It must be cash, subordinated, and properly documented.
US private placements and secured notes
To scale beyond banks, issue senior secured notes to US institutions under Reg D 506(c) or 4(a)(2). Provide an offering memo, audited financials, borrowing base mechanics, use of proceeds, counterparty and country limits, covenants, and monthly reporting. Notes are secured by the same collateral as bank lines with an intercreditor. A revolving note can match short tenors.
Perfecting the security interest
In the US file UCC-1s describing collateral and proceeds. Use deposit account control agreements for collections. Notify account debtors on assigned receivables. Endorse negotiable documents and hold originals where required. Record pledges and fixed charges on inventory in relevant jurisdictions. Align Incoterms and title transfer points with the security package. Keep sanctions and KYC evidence current.
What lenders want to see — checklist
- Track record, audited financials, monthly management accounts.
- Trade cycle by flow with Incoterms, routes, and timelines.
- Counterparty list with limits, KYC and sanctions screens.
- Contracts, LCs or POs with payment terms and maturity ladders.
- Borrowing base template for eligible AR and inventory.
- Collateral trail: BLs, warehouse receipts, surveyor reports, insurance binders.
- Risk mitigants: confirmations, credit insurance, hedging and FX policy.
- Governance: board approvals, related-party policy, compliance owner.
- Liquidity map: availability under lines, first loss capital, cash waterfall.
- Legal pack: security docs, intercreditor outline, enforceability memos.
Need a borrowing base, LC program, or a secured note placed with institutions
Request a Proposal Book a ConsultationDisclaimers
- We advise and arrange financing. We are not providing legal or tax advice.
- Terms vary by commodity, counterparty, country, and collateral.
- All transactions are subject to diligence, approvals, and documentation.
