Notice. FG Capital Advisors focuses on commodities, structured trade finance, private credit, and related capital solutions. The firm provides financial modelling, analytical support, sponsor side structuring, and arrangement services for trade finance facilities. FG Capital Advisors is not a bank, lender, credit insurer, or broker dealer and does not issue loans, guarantees, or insurance products. Any facility, LC, guarantee, derivative, or investment product referred to on this page is provided by regulated entities under their own licences, terms, and documentation. This guide is general commentary and does not replace transaction specific legal, tax, or credit advice.
Guide to Trade Finance Facility Agreements
Trade finance is the difference between booking cargo and actually moving it. Facility agreements are where that funding becomes real: limits, collateral, covenants, and default triggers set out on paper. If the contract is badly understood or poorly structured, working capital turns into a constraint instead of a tool.
This guide explains how trade finance facility agreements are built and what sponsors should have in place before they seek funding. If you require a borrowing base, pre export, receivables, or LC-backed facility and want a trade finance arranger on your side with bank and fund relationships, FG Capital Advisors can step in on the sponsor side.
Request Trade Finance Funding SupportWhat Is A Trade Finance Facility Agreement?
A trade finance facility agreement is the primary contract between a borrower and one or more lenders under which working capital is provided to support physical trade flows. It sets out the facility type, size, pricing, collateral rules, covenants, and events of default. Security and ancillary documents sit around it, but this agreement controls how funding is drawn, monitored, and repaid.
Facility types commonly documented under these agreements include:
- Borrowing base and revolving facilities. Lines secured against inventories, receivables, and sometimes cash or margin deposits. Availability rises and falls with eligible collateral.
- Pre export and prepayment facilities. Loans advanced against confirmed offtake contracts or export flows, with repayment from controlled export proceeds.
- Receivables finance. Funding against short dated receivables to agreed buyers, under agreed terms, usually with tight reporting.
- LC and guarantee backed facilities. Limits for issuing documentary LCs, standby LCs, or demand guarantees backing imports, exports, or performance obligations.
When FG Capital Advisors acts as arranger, we work with sponsors to decide which mix of these facility types matches their trade flows before approaching banks or private credit funds.
Key Parties And Document Stack
A trade finance facility is rarely a single document. It sits in a stack of agreements that all interact. Borrowers need a clear view of who does what and which contracts control security and cash.
Main parties:
- Borrower. The trading or operating company drawing under the facility.
- Guarantors. Parent or group entities providing guarantees or security.
- Lender or lender group. Individual banks, a club, or a syndicated group, and in some cases private credit funds.
- Facility and security agent. Parties appointed to administer the facility and hold security on behalf of the lenders.
Typical supporting documents:
- Security documents. Charges, pledges, and assignments over inventories, receivables, shares, contracts, and accounts.
- Account control agreements. Documents that give lenders control over key collection or escrow accounts.
- Intercreditor agreements. Arrangements between this facility and other lenders that set priority and standstill rules.
- Collateral management agreements. Contracts with warehouse or collateral managers for stored commodities.
- Hedging agreements. ISDA documents where derivatives are used, often tied in through cross-default and collateral provisions.
When we arrange a facility, part of the job is aligning this document stack with the sponsor’s group structure and trade flows so lenders can see a clean security and cash waterfall.
Core Economic Terms: Limit, Tenor, Pricing, And Fees
The facility agreement sets the economics that will live with the business for years. These are the headline items every sponsor focuses on first.
- Facility limit. The maximum principal amount available. For borrowing base structures, the real usable limit is the lower of the headline cap and what the borrowing base formula allows.
- Tenor. Overall term of the facility and, for transactional lines, the maturity profile for each drawdown or shipment cycle.
- Margin and base rate. Lender margin over a reference rate or a fixed grid, often with pricing tiers based on leverage, utilisation, or credit events.
- Fees. Arrangement fees, commitment fees on undrawn portions, LC and guarantee fees, amendment fees, and sometimes utilisation or non-use fees.
- Currencies. Currencies available for drawings and the rules around FX conversion and how it interacts with limits and covenants.
As arranger, FG Capital Advisors works with sponsors to present lenders with an economic structure that reflects risk and collateral while staying inside what the borrower’s business can realistically support.
Collateral, Security, And Control
Trade finance runs on collateral and control. The facility agreement and its security documents describe in detail what is fundable and how lenders control proceeds when stress appears.
- Collateral definitions. Clear rules on which inventories, receivables, and contracts are eligible, by product, jurisdiction, counterparty, and payment term.
- Advance rates. Percentage funding levels applied to each collateral type, adjusted for quality, volatility, jurisdiction, and concentration.
- Borrowing base formula. The mechanics that convert eligible collateral into availability, including ineligibles and reserves.
- Security package. Charges and pledges over core assets, plus any guarantees from group entities, and required registrations to perfect security.
- Cash and proceeds control. Account structures, lockboxes, collection accounts, and sweep rules for export proceeds and receivables.
Lenders will not advance real size without confidence in these controls. A large part of any trade finance arranging mandate is proving that collateral and cash can actually be monitored and controlled as the documents describe.
Financial Covenants And Reporting Requirements
Financial covenants and reporting clauses give lenders an early warning system and define how quickly problems surface in a formal way. For sponsors, these terms set the route by which stress becomes a negotiation or a default.
- Leverage and coverage ratios. Tests based on EBITDA, net debt, interest, or fixed charges, with defined add-backs and exclusions.
- Net worth and equity tests. Minimum tangible net worth or similar measures to ensure a base level of capital.
- Liquidity tests. Minimum cash and undrawn availability requirements, in some cases adjusted for seasonality.
- Information undertakings. Timetables for audited accounts, management accounts, borrowing base certificates, ageing schedules, and compliance certificates.
- Reporting format. Required templates or data fields for collateral and covenant reporting.
When FG Capital Advisors presents a transaction to lenders, part of the negotiation is aligning covenants with realistic business performance and agreeing reporting the sponsor can actually deliver.
Trade-Specific Operational Clauses
Trade finance facility agreements go further than standard corporate loans. They reach into trade terms, credit policies, and hedging practices.
- Incoterms and payment terms. Limits on which Incoterms and payment structures the borrower can offer without consent, to keep risk profiles inside agreed ranges.
- Buyer and supplier limits. Requirements to maintain approved counterparty lists and limits to avoid overexposure to a single buyer or supplier.
- Hedging rules. Requirements for hedging commodity and FX risk and expectations around how margin calls are funded and reported.
- Warehouse and logistics controls. Standards for warehouse operators, collateral managers, inspection regimes, and stock insurance.
- Restrictions on disposals. Limits on asset sales or additional pledges that might weaken the security base for the facility.
For sponsors, this means that internal credit, trading, and logistics policies often need to be tightened before approaching serious lenders. Presenting that policy framework is part of an arranging mandate.
Conditions Precedent, Events Of Default, And Enforcement
The closing list and default clauses are where lender protection is concentrated. Sponsors need a clear view of what must be delivered before first drawdown and what can trigger a stop to funding.
Conditions precedent:
- Corporate approvals, KYC, and corporate structure evidence.
- Executed security documents with proof of registration or filing.
- Insurance confirmations for key assets and stock.
- Legal opinions on capacity, security, and enforceability.
- Initial borrowing base certificate and data pack.
Events of default:
- Non-payment and breaches of financial covenants or key undertakings.
- Misrepresentation or breach of warranties.
- Cross-default to other material financial indebtedness above agreed thresholds.
- Insolvency, administration, or similar proceedings.
- Loss of licences, sanctions issues, or material regulatory problems.
Once a default occurs and is not cured or waived, lenders can suspend drawings, accelerate the facility, and enforce security. During an arranging mandate, FG Capital Advisors works on the commercial side of these terms, but legal drafting remains with counsel.
What Borrowers Should Prepare Before Seeking Trade Finance
Lenders that fund real size expect more than a pitch deck and last year’s accounts. Before FG Capital Advisors approaches banks or funds as arranger, we push sponsors to have a minimum internal package ready.
- Trade flow map. Clear list of products, routes, Incoterms, suppliers, buyers, and payment terms, with emphasis on recurring flows.
- Collateral history. Stock and receivables ageing, turnover, loss experience, and concentration data over several years.
- Financial model. Integrated P&L, balance sheet, and cash flow with borrowing base, covenant forecasts, and stress scenarios.
- Policy documents. Written credit, hedging, and risk policies the management team is actually applying.
- Basic legal and tax views. Early input on holding structures, security locations, and cross-border tax issues.
The stronger this preparation, the easier it is to secure competitive terms from banks and private credit funds and keep the facility bankable during stress.
How FG Capital Advisors Arranges Trade Finance Facilities
FG Capital Advisors acts as a sponsor side trade finance arranger. The objective is simple: help credible trading and corporate clients secure bank and fund-backed facilities that reflect real flows, collateral, and risk management rather than theoretical structures.
Typical mandate scope includes:
- Defining the target facility mix (borrowing base, pre export, receivables, LC-backed) and sizing based on real trade flows.
- Building or refining the financial and borrowing base model that lenders will use to assess the credit.
- Drafting the commercial term sheet from the sponsor side, including collateral rules, covenants, and reporting.
- Preparing a lender pack that explains the trade story, collateral, and risk controls in credit officer language.
- Mapping and approaching suitable banks and private credit funds, subject to regulation and conflicts.
- Supporting commercial negotiations around term sheets and key economic points in the facility documents.
Legal drafting, local law security work, and tax structuring remain with external counsel. FG Capital Advisors sits between sponsor, counsel, and lenders to keep the facility bankable and commercially workable.
If you need a structured trade finance facility rather than ad hoc overdrafts or one-off transactional lines, the right time to design it is before the next peak season or liquidity squeeze, not during it.
Share a concise overview of your business, trade flows, and funding requirement through the FG Capital Advisors client intake form. The team will review the information and respond with a view on mandate fit for arranging borrowing base, pre export, receivables, or LC-backed trade finance facilities with suitable lenders.
Request Trade Finance Arrangement SupportDisclosure. FG Capital Advisors provides financial modelling, structuring input, sponsor side advisory, and arranging services. The firm does not originate, offer, or sell securities, loans, deposits, guarantees, or insurance products and does not accept client money. Any trade finance facility, LC, guarantee, derivative, or investment product referenced on this page is carried out by regulated entities under their own licences, terms, and documentation. This guide is not legal, tax, accounting, or investment advice. Any engagement is subject to internal approval, conflict checks, KYC and AML checks where required, and a formal engagement letter.
