We Offer Working Capital Funding Through Structured Trade Finance

Structured Trade Finance makes import and export transactions possible for entities, ranging from a small business dealing in product or commodities to multi-national corporations trading with large amounts of inventory and commodities worldwide.

Smaller businesses often have minimal access to working capital utilising loans and other forms of interim financing to cover the cost of goods they plan to buy or sell. Even with a confirmed order for products, many banks will not provide loans or overdraft protection for these transactions.

Many business owners, small or large, do not have the working capital to purchase goods or commodities that can take between four to six weeks or more to arrive from an overseas manufacturer. On the reverse side, companies that export goods and commodities do not have the working capital to wait until their export products have arrived at some distant destination weeks later before receiving payment.

Some sources estimate that over 80 percent of global trade depends on trade finance, which helps goods keep moving even when companies do not have the working capital to finance the transactions themselves.

Trading intermediaries and funders oversee and facilitate different transactions between a buyer (importer) and a seller (exporter). These parties step in to finance the business transactions between the buyer and seller. These transactions can take place domestically or internationally.

The availability of trade finance has spawned massive growth in international trade. Trade finance covers different activities, such as issuing letters of credit, lending, forfaiting, exporting, importing, and factoring. The trade finance process could involve several different parties, including the buyer, seller, trade financier, export credit agencies, and insurers.

Trade finance has historically been a profitable function of banks, but regulatory changes and balance sheet restructuring, following the financial crisis of 2008, forced many to scale back this lending business.

Such limited credit appetite from international banks and ever-slowing turnaround time for delivering seasonally sensitive trade-related facilities has resulted in large local traders in the regions facing constraint in their expansion plans.

It has also made trade finance significantly harder for smaller producers and traders, leading to increased demand for alternative funding sources. At the same time, the risk profile at a transaction level remains unchanged. These traders transact predominantly between Africa, South Asia, Latin America, and Europe, and are heavily reliant on commercial funding from large international trading houses.

Regional banks are increasingly interested in expanding their asset base by tapping into existing cross-regional trade flows currently serviced by international banks; however, they lack the operational platforms and physical presence to do so safely.

Investment and Sovereign Wealth Funds continuously look to diversify their portfolios within alternative asset classes to search for yield. Given the current low-interest-rate environment and excess liquidity, funds are looking beyond traditional asset classes (property, fixed income, equities) for yield. These funds actively pursue investment in trade and commodity-related assets. However, like banks, they face the same constraints to safe entry and exit. This situation has effectively become another new opportunity for investors.

Teybridge’s transaction philosophy aims to deliver a non-correlated investment return to investors through a strategy focused on shorter-term opportunities in commodity-based and generally structured trade finance transactions, emphasising transactions demonstrating strong security and liquidity levels is deemed appropriate.

The conservative investment approach focuses on the security of transactions. It does not rely solely on the beneficiary or the off-taker’s credit quality but also on the strength of the total funding structure created using appropriate hedging instruments and other risk mitigants such as options and credit insurance.

Investments are only be entered into with counterparties and off-takers well known to the experienced investment management team. They have substantial track records of ability to execute and sound credit quality.

Teybridge seeks to maintain diversification across various aspects, including geographical, trade type, underlying commodity, and counterparty.

Collateral management, monitoring and inspection are pre-requisite functions that Teybridge considers necessary to ensure that the security of physical commodities is ensured at all times.

Insurance backed by first-class insurers protects securities against specific and general perils, where applicable.

The stringent management of these and other security elements enables Teybridge to deliver good, risk-adjusted returns. Simultaneously, the overall strategy provides investors access to a market traditionally dominated by the banks.