Importance of Trade Finance & Structured Trade Finance for Importers and Exporters of Commodities?


Trade finance is the method importers and exporters of goods and products used to fund their business. Basically, trade finance has been in existence for many thousands of years – and one can trace the roots of trade finance and structured trade finance right back to the early days of China and the silk route, Mesopotamia and Europe. Trade Finance was around long before Europeans settled in America and long before the world’s stock markets were born!

Today, trade finance is a massive, multi-billion dollar business. As the world articles are more and more products and goods are bought and sold, so more and more banks and financiers need to borrow money to finance the purchase and sale of these goods and commodities -. On the global supply chain

How is the financial trading and structured trade finance useful

Take the example ­čśĽ imagine you are a trader in cocoa beans in Cote d’Ivoire, buying beans locally and selling them to foreign buyers. To make a purchase, you need to have money to buy the cocoa up-country in Africa, prior to their export. Where you will find money to make these purchases? And suppose you are an international buyer; shipper, purchasing from cocoa traders all over West Africa – how will you finance your business, at any time may exceed your cash reserves? What could be supported by your bank who, if they are traditional lenders, will only lend against your balance sheet

This is where trade finance and structured trade finance is useful -? Your business can grow and develop if you use the services of a specialist Finance department who will tailor Trade Finance structures can be tailored to your needs, using the insurance product you are trading, rather than your own balance sheet or other assets.

What is the basis of trade finance and structured trade finance?

Goods and commodities have an underlying value of their own. For example, if cocoa beans are worth many hundreds or even thousands of dollars per tonne, then once a big pile of beans is accumulated in one place; in a warehouse or on a ship, it is worth a lot of money. A bank may lend money against the total value of the beans, minus some amount to take account of price and other risks


It is the same for every commodity or trade good which is resalable. A bank will make a loan as long as the collateral “adds up” and as long as the bank is satisfied with the way the deal is structured between both the buyer and seller. A key issue is that if something goes wrong the bank is able to take possession of the goods or products and sell them to realize funds to repay any loan amounts outstanding.

Basically, when we talk of structured trade finance we are talking about deals where complex arrangements are put in place to ensure a bank can take possession and sell the underlying capital used for the loan; in this example, the products and the products themselves

Is Trade Finance complexity.?

No. It is a simple matter if the structures used in trade finance more complex deals require a lot of work for all parties. This is why the total loan structured trade finance loans must be high enough to justify the participation of highly paid bankers, lawyers and other consultants.

Where can I find out more about trade finance and structured trade finance?

Day Robinson Group has offices in London and New Delhi and is one of the world’s leading training in the trade finance sector. For more information you can visit our site: http: /// , or you can contact the author of this article, Dan Day-Robinson at Day Robinson International in the UK (DDR @ dayrobinson .com).


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