Integrated Supply Chain Finance for Trading Companies
Finance supplier purchases, inventory and receivables under one coordinated facility. See how integrated supply chain finance can support the full trade cycle.
Need One Facility Across Supplier Payment, Inventory and Receivables?
A trading company may require working capital before a receivable exists. The initial funding need may arise when a supplier issues a pro forma invoice. The collateral then becomes purchased inventory, goods in transit and, after delivery, an account receivable.
The facility therefore needs to accommodate several collateral states during the same trade cycle: procurement, inventory, transit, invoicing and collection.
Financely structures and places supply chain finance, borrowing-base and structured trade facilities for established companies with identifiable goods, documented counterparties and a defined source of repayment.
Facility Components
The credit structure may incorporate several financing techniques under one revolving facility, master agreement or coordinated financing arrangement.
Pre-Shipment Finance
Working capital advanced before shipment to fund procurement, production, processing or other costs required to perform an underlying sales contract.
Advance Against Inventory
A loan or revolving advance supported by eligible stock, commodities or finished goods subject to agreed valuation, custody and collateral controls.
Advance Against Receivables
Debt financing secured by current or future trade receivables, with repayment sourced from collections on those receivables.
Receivables Purchase
Purchase of eligible trade receivables through factoring, receivables discounting or another receivables-purchase structure.
How a Borrowing-Base Facility Can Follow the Trade Cycle
An importer, exporter, distributor or commodity trader may use a revolving facility under which availability changes as goods move through the transaction.
| Stage | Financed Asset | Relevant Technique | Typical Credit Control |
|---|---|---|---|
| Procurement | Approved supplier invoice, pro forma invoice, purchase contract or confirmed order | Pre-shipment advance, purchase finance or direct supplier payment | Approved supplier list, documentary conditions, direct disbursement and evidence of corresponding sale |
| Inventory | Eligible raw materials, commodities or finished goods | Inventory advance or borrowing-base revolver | Eligibility criteria, advance rate, valuation methodology, collateral manager, warehouse control and insurance |
| Transit | Identifiable goods moving under transport documents | In-transit inventory financing or shipment finance | Bill of lading control, marine cargo insurance, inspection evidence and controlled document release |
| Receivable | Eligible invoice against an approved account debtor | Receivables advance, receivables discounting or factoring | Assignment, debtor eligibility, aging tests, concentration limits, dilution controls and collection mechanics |
| Collection | Cash proceeds from the account debtor | Revolver paydown or receivables purchase settlement | Blocked account, lockbox, collection account, cash dominion or agreed payment waterfall |
Facility documents determine when inventory exits the borrowing base, when a receivable becomes eligible, how collateral proceeds are applied and whether a repayment or redraw occurs when the asset changes category.
For larger or non-standard transactions, Financely may structure the requirement within a broader trade finance structuring mandate.
Borrowing-Base Availability
In an asset-based facility, the committed amount and the amount available to draw are different measurements.
Availability is calculated against eligible collateral after applying advance rates, reserves, concentration limits and other deductions specified in the facility agreement.
Illustrative Availability Calculation
Eligible inventory × inventory advance rate
+ eligible receivables × receivables advance rate
− reserves
− ineligibles
− availability blocks
= borrowing-base availability
Inventory Eligibility
An asset-based lender will normally calculate availability against eligible inventory rather than gross inventory reported on the balance sheet.
Inventory eligibility can depend on:
- clear legal title;
- approved country and storage location;
- warehouse arrangements;
- absence of competing liens;
- retention-of-title exposure;
- quantity verification;
- quality verification;
- SKU or commodity marketability;
- inventory aging;
- price volatility;
- net orderly liquidation value;
- insurance coverage;
- perishability;
- obsolescence;
- release controls.
Controlled commodity structures may use warehouse receipts, pledge arrangements, field warehousing or a collateral management agreement with an independent collateral manager.
Financely covers these transactions within its structured trade finance services, including inventory finance, warehouse finance, pre-export finance, receivables finance and borrowing-base facilities.
Receivables Eligibility
Following delivery and invoicing, the collateral analysis moves from stock controls to account-debtor credit, invoice eligibility and collection performance.
Gross accounts receivable and eligible accounts receivable will rarely be identical.
Other ineligibles can include related-party receivables, disputed invoices, contra accounts, prohibited jurisdictions, invoices subject to contractual set-off, long-dated receivables and receivables that cannot be validly assigned.
Where the transaction is structured as a receivables purchase, Financely can also assess export factoring and receivables discounting structures.
Inventory-to-Receivables Conversion
Consider a trading company purchasing finished goods from an approved supplier and selling them to a corporate buyer on 60-day terms.
At procurement, the finance provider may fund an approved supplier invoice directly.
After acquisition, qualifying goods may enter an inventory sublimit. Availability is then calculated against the eligible inventory value using the contractual advance rate and applicable reserves.
Shipment and delivery remove the relevant goods from inventory. Once the buyer's payment obligation crystallizes and an eligible invoice is issued, the receivable can enter the receivables borrowing base.
Customer collections are directed through the agreed collection mechanics. Depending on the facility, proceeds may automatically reduce outstanding utilization before becoming available for subsequent drawings.
Collateral Controls
Depending on jurisdiction, collateral and credit quality, the lender may require:
- direct payment to approved suppliers;
- assignment or pledge of receivables;
- security over inventory;
- warehouse receipts;
- collateral management agreements;
- independent stock reporting;
- inspection certificates;
- marine cargo insurance;
- stock insurance;
- loss-payee endorsements;
- controlled inventory releases;
- blocked collection accounts;
- lockbox arrangements;
- cash dominion;
- borrowing-base certificates;
- field examinations or collateral audits;
- mandatory prepayment following a borrowing-base deficiency.
Inventory and receivables may also be subject to separate sublimits within the same committed revolving facility.
Information Required for Underwriting
Corporate and Financial
- historical financial statements;
- current management accounts;
- existing debt schedule;
- existing security interests;
- bank statements;
- corporate structure;
- beneficial ownership;
- historical working-capital utilization.
Receivables
- accounts receivable aging;
- customer-level sales data;
- invoice history;
- collection history;
- dilution data;
- credit-note history;
- bad-debt history;
- customer concentration;
- sample sales contracts;
- sample invoices.
Inventory
- inventory listing by product;
- inventory listing by location;
- historical inventory turns;
- purchase-cost data;
- sales-price data;
- warehouse arrangements;
- stock insurance;
- inventory aging;
- inspection procedures;
- evidence of title.
Trade Flow
- supplier contracts;
- pro forma invoices;
- customer purchase orders;
- sales contracts;
- Incoterms;
- supplier payment terms;
- buyer payment terms;
- shipping route;
- bills of lading;
- procurement-to-collection cycle;
- transaction-level gross margins.
Financely's Mandate
Financely acts as structuring and placement advisor rather than direct lender.
We prepare the credit request, determine the appropriate facility architecture, identify suitable capital providers and manage the placement process through lender underwriting.
Analyse the trade cycle, requested commitment, collateral, counterparties, existing security and repayment source.
Define facility type, sublimits, eligibility criteria, advance mechanics, collateral controls, tenor and repayment.
Approach banks, ABL lenders, trade finance funds, factors and private credit providers matched to the transaction.
Manage credit questions, diligence requests, indicative terms, term sheets and progression into documentation.
Financely also provides trade finance structuring and distribution for pre-export finance, post-shipment finance, inventory facilities, receivables finance and transaction-specific working-capital requirements.
Eligible Borrowers
Typical mandates involve established importers, exporters, distributors, manufacturers, processors and commodity traders with recurring B2B trade flows.
Relevant credit characteristics include:
- established trading history;
- recurring supplier relationships;
- identifiable physical goods;
- established customers;
- documented purchase and sales contracts;
- historical inventory data;
- historical receivables data;
- measurable working-capital cycles;
- a defined repayment source.
Financely generally works on qualified B2B transactions from US$1 million.
Where Separate Facilities Create a Gap
Separate procurement, inventory and factoring lines can create timing problems where their respective eligibility periods do not overlap.
A purchase financier may require repayment on release of the goods. An inventory lender may only recognize the collateral after arrival at an approved warehouse. A factor generally requires an eligible receivable before it can advance.
A borrowing-base or structured trade facility can cover more than one collateral category where the lender's credit policy permits it and the security documents provide for the transition between inventory and receivables.
Seeking a Revolving Facility Against Inventory and Receivables?
Financely structures and places working-capital facilities for established companies requiring procurement finance, inventory availability and receivables-backed liquidity under a coordinated facility.
Submit the requested commitment, financial statements, supplier terms, buyer terms, inventory position and receivables data for review.
Request a QuoteFrequently Asked Questions
Can one revolving facility finance both inventory and receivables?
Yes. A borrowing-base facility can include separate eligibility criteria, advance rates and sublimits for inventory and receivables.
Is factoring the same as receivables-backed lending?
No. Factoring is generally structured as a receivables purchase. Receivables-backed lending involves an advance secured by receivables.
What is an inventory borrowing base?
It is the eligible inventory value against which lender availability is calculated after application of advance rates, reserves and other contractual deductions.
What can make a receivable ineligible?
Common ineligibles include past-due invoices, disputed receivables, related-party balances, excess customer concentration, prohibited jurisdictions, contractual set-off exposure and receivables that cannot be validly assigned.
What is a borrowing-base deficiency?
A deficiency occurs when outstanding utilization exceeds borrowing-base availability. The facility agreement normally specifies the required cure, which may include repayment or delivery of additional eligible collateral.
Can goods in transit remain financed?
Yes, subject to lender requirements concerning title, transport documents, insurance, route, carrier and control of the goods while in transit.
Does Financely provide the facility directly?
No. Financely structures and places the transaction with relevant financing institutions. Credit approval and funding are provided by the selected lender or finance provider.
How long does the process take?
Routine mandates with complete documentation have an indicative execution period of approximately 45 days. Cross-border, collateral-intensive or legally complex facilities may require longer.