Borrowing Base Facilities for Physical Commodity Trades
Borrowing Base Facilities for Physical Commodity Trades
Borrowing base facilities allow commodity traders to raise capital by leveraging inventory, receivables, and signed contracts — not just balance sheet strength.
In physical commodity trading, timing is everything. You’re buying, shipping, storing, and delivering across borders — long before the final buyer wires the funds. Traditional debt doesn’t fit that timeline. That’s where borrowing base facilities come in. They offer structured, asset-backed financing tailored to the realities of trade.
What Is a Borrowing Base Facility?
A borrowing base facility is a revolving credit line secured by current assets — typically inventory, receivables, and in-transit goods. The available borrowing amount (“borrowing base”) fluctuates based on the value of the collateral. When the trader moves more volume, the facility scales with it.
Why Commodity Traders Use Borrowing Base Structures
These facilities are built for traders who need to bridge the cash gap between procurement and payment. Unlike vanilla loans, borrowing base credit lines respond to the ebb and flow of your trading activity. They're especially common in agri, metals, oil, and refined product deals.
| Feature | Why It Matters |
|---|---|
| Dynamic funding limit | Facility size adjusts with inventory and receivables |
| Collateral-based | Focuses on trade flows, not long-term credit ratings |
| Rolling maturity | Facilities typically reset every 12 months or less |
| Lender oversight | Collateral monitored through reports and audits |
Eligible Collateral in a Borrowing Base
- Warehouse-stored commodities with valid receipts
- In-transit cargo with title and tracking
- Receivables from vetted off-takers or anchor buyers
- Hedged positions that reduce price exposure
Each asset is typically discounted by a "haircut" to account for price volatility and liquidity risk. For example, copper stored in an LME-approved warehouse might be valued at 85% of spot, while an open receivable from a Tier 1 buyer might qualify at 90%.
How the Facility Works
Once the facility is in place, the trader submits a monthly or bi-weekly borrowing base report detailing inventory levels, receivables, and goods in transit. The lender recalculates the borrowing limit accordingly. If the collateral pool drops, the trader must repay the difference or provide substitute collateral.
Use Case: Funding $25M in Oil Storage and Sales
A regional oil trader holds 40,000 barrels of diesel in bonded storage, valued at $3.5M. They also have $21.5M in confirmed receivables from downstream buyers. The trader secures an $18M borrowing base facility to finance storage, handling, and forward purchases.
The lender monitors the tanks via inspection reports and verifies the receivables monthly. The facility rolls forward as cargo turns over, keeping capital flowing through each transaction cycle.
Risk Management Built Into the Facility
- Advance rates are capped to protect the lender from price shocks
- Facilities include covenants tied to position size and coverage ratios
- Most lenders require full visibility over logistics and invoicing
Because these facilities are asset-dependent, even traders with thin margins or seasonal cash flows can qualify — if the structure is tight and verifiable.
When to Use a Borrowing Base Facility
- You have high-volume trading activity with long payment cycles
- You need liquidity tied to specific shipments, not your balance sheet
- You’re working with known buyers, but they pay on delivery or invoice
- You want a flexible, revolving line to finance working capital
How Financely Structures Borrowing Base Deals
We underwrite trade-backed borrowing base facilities for commodity companies across metals, energy, agriculture, and chemicals. We help clients define collateral pools, prepare borrowing base reports, and negotiate terms with lenders who understand complex trade flows.
Need Working Capital Without Giving Up Equity?
Financely helps you access secured borrowing base credit lines tailored to your commodity trade cycle. Whether you're scaling volumes or bridging payment delays, we structure the right facility to keep your cargo moving.
Submit Your Deal Book a 1:1 CallGet Started With Us
Submit Your Deal & Receive a Proposal Within 1-3 Working Days
Submit your deal using our secure intake form, and receive a quote within 1-3 business days. Existing clients can connect with their relationship manager through our secure web portal.
All submissions are
promptly reviewed, and all communications are conducted through the intake form or the client portal for a seamless and secure process.
Thank you for considering working with us. A nominal fee of US$500 is required upon completion of each form. This fee covers the time and effort we invest in reviewing your submission and crafting a thorough proposal. We receive numerous inquiries and prioritize those that carry this fee, ensuring serious applicants receive prompt attention.
Trade Finance
Tap into solutions like letters of credit, bank guarantees, and payment facilitation. We address the challenge of global transaction risk through structured strategies that foster cross-border growth. Complete the form to unlock streamlined funding aligned with your commercial objectives.
Submit a RequestProject Finance
Access non-recourse funding for infrastructure, renewable energy, or other capital-intensive ventures. We mitigate capital constraints by isolating project assets and focusing on risk management. Provide your details to receive a structure that drives growth and maximizes returns.
Submit a RequestAcquisitions
Secure financing for business or real estate acquisitions. We ease transaction hurdles by reviewing cash flow, synergy opportunities, and exit plans. Complete the form for a customized proposal that supports your strategic investment objectives.
Submit a RequestFor Banks
Financely assists banks facing Basel III pressures by distributing trade finance deals and providing collateral for letters of credit. We reduce capital burdens while preserving client relationships and fostering service expansion. Submit your request to optimize your trade finance offerings.
Submit a RequestOnce we receive your submission, our team will review your information to determine feasibility. If eligible, you will receive a proposal or term sheet within 1–3 business days. Visit our FAQ and Procedure pages for more information.
Disclaimer: Financely provides financing based on due diligence and feasibility. Approval is not guaranteed, and past performance does not predict future outcomes. All terms are subject to review. Financely primarily assists with structuring and distribution. Qualified parties carry out the project if the client approves the proposal.
