Prepayment Finance for Refined Petroleum and Mazut Offtake
Prepayment finance is a structured facility used to advance funds before a cargo is shipped, against a real offtake and a real production or supply plan. In oil products, that usually means a refinery, a regular supplier or a producer receiving funds in advance of delivery,.
Prepayment finance is a structured facility used to advance funds before a cargo is shipped, against a real offtake and a real production or supply plan. In oil products, that usually means a refinery, a regular supplier or a producer receiving funds in advance of delivery, with repayment coming from the offtake proceeds under documented controls. It is not an advance paid to an unverified seller who promises a discounted cargo once a fee is received.
The general Financely page on pre-export and prepayment finance describes the structure across commodities, under the heading Fund Production Before Shipment. This guide applies it to refined petroleum and to Mazut M100, where specification, origin and custody need extra care. Financely is an advisor and arranger, not the party that prepays the cargo.
When prepayment is the right description
Prepayment fits when there is a named offtaker, a named product, a production or supply plan that can be tested, and a control package that keeps the value from leaking. A refinery selling EN590 or Jet A-1 under a term offtake, or a residual-fuel producer selling a named GOST grade to a known plant, are the clean examples. A trader who merely hopes to buy a cargo next month is not a prepayment candidate. That trader may instead need a documentary LC, a borrowing base, or a single-cargo facility.
The offtake contract has to be strong enough to be the repayment story. Quantity, specification, price formula or fixed price, delivery window, inspection, and payment mechanics should be written, not implied. If the offtaker's payment is itself supported by a letter of credit or SBLC, that support should be consistent with the prepayment waterfall. For residual fuel, origin and restrictive-measures screening sit at the front of the file, as discussed in how lenders treat Jet A-1, EN590 and mazut differently.
Controls that make a prepayment bankable
- A clearly identified producer or supplier, with a right to produce or sell the product, and a performance record that can be checked.
- An offtake with a buyer that can be screened and that has a reason to take the grade.
- Independent inspection at the points that actually transfer value, as set out in independent inspection and Q&Q.
- Custody or proceeds control, often a collateral management agreement once product exists, and a payment path that returns funds to the prepaying lender.
- A construction of events of default if the product is not delivered, goes off-spec, or is diverted.
Advance amounts, tenors and any reserve or holdback are set by the capital provider. This article does not invent those figures. A prepayment that is really an unsecured loan to a thinly capitalized trader, dressed up with a future SPA, will usually be declined.
| Feature | Prepayment against a real offtake | A disguised advance-fee purchase |
|---|---|---|
| Payee | The producer or supplier under a contract the lender can read | A broker, a nominee, or an account that does not match the seller |
| Repayment | Offtake proceeds, often under an LC or a controlled account | A promise that a buyer will appear after the fee is paid |
| Product | A named standard and grade, with an inspection plan | A discount offer with no verifiable allocation |
| Controls | Inspection, custody, assignment of proceeds, covenants | A procedure, an SCO, or a proof of product that cannot be called back |
Scams to keep out of the file
Prepaid fuel deals are a favorite costume for discount petroleum scams and fake seller procedures. If the story starts with a request for a small payment to unlock a large cargo, stop. Legitimate prepayment is a structured facility, documented like one, and it is diligence-heavy. For gold, which has its own prepayment and pre-financing issues, stay on the existing gold doré bar supply chain finance page and the small-scale miner pre-financing note, and read KYC, AML and OECD due diligence for gold doré finance before you mix metals and fuel in the same conversation.
When prepayment is the wrong label
If the applicant is a trader that still needs to find a cargo, the right discussion is usually a documentary LC, an inventory facility, or a refusal until the contract exists. Calling that request a prepayment does not make it one. If the offtake is a letter of intent with no specification, no volume and no payment mechanics, it is not a repayment path. If the supplier cannot be visited or screened, it is not a prepayment candidate, even if the discount looks attractive. Those facts belong in the same conversation as how lenders treat Jet A-1, EN590 and mazut differently: residual fuel, in particular, should not be prepaid against a vague origin story.
Security around a genuine prepayment can include assignment of the offtake, a charge over proceeds, step-in rights, inspection rights, and, once product exists, a CMA. The package is negotiated with the capital provider. Financely can help you assemble it. We do not take security in our own name as a lender, because we are not the lender.
If you have a real offtake and a real supply plan, submit the contracts, the specification, the inspection plan and the corporate profile through deal submission. If you still need a supplier, use commodity sourcing first.
Frequently Asked Questions
Is prepayment the same as paying a seller a deposit to reserve a cargo?
No. Prepayment finance is a structured facility against a documented offtake and a documented supply plan, with inspection and proceeds controls. A deposit paid to an unverified seller to unlock a discounted cargo is a different, and often dangerous, transaction.
Can mazut be prepaid?
Only where origin, specification, end-use, and offtake can be evidenced, and where a capital provider is willing to consider residual fuel. Many will not. See the Mazut M100 trade finance page. A prepayment against a vague origin story or an unverified seller is not a financeable offtake.
Does Financely prepay the cargo?
No. Financely is an advisor and arranger only. It does not prepay cargoes, lend, or take title. If a prepayment is made, it is made by a bank or another capital provider that accepts a complete file from a bankable producer or offtaker with a documented repayment path.
What documents should I send?
Send the offtake, the supply or production plan, the named specification, the inspection plan, the corporate profile, and the amount and tenor you are seeking. Use the deal submission form on financely.io. Financely reviews real offtakes from bankable counterparties, not deposits paid to unlock a discounted cargo.
Financely is an advisor and arranger, not a lender and not a supplier. If you have a real transaction and need a lender-ready file, submit the mandate through the intake form.
You can also read how structured trade finance advisory is scoped before you send the file.
Sources and references
- General pre-export and prepayment framework: https://www.financely.io/pre-export---prepayment-finance
- Product standards cited in this cluster: EN 590, ASTM D1655 / DEF STAN 91-091, GOST 10585-2013.
- Financely deal submission: https://www.financely.io/deal-submission