Funder provides borrower, normally a commodity trader, with liquidity to cover the time needed to purchase goods from a Seller and deliver them to an End Customer. Goods are normally bought on FOB basis at sight and are often sold on a CIF basis at Cash Against Documents.
Funder advances fees to an exporter or end supplier to enable the goods to be exported. Often the financing is provided at a partial percentage of the supplier invoice into an escrow account with the Borrower mending the gap to fulfil the remaining invoice amount. Upon delivery, the End Customer may also pay into this collection account with fees and principal being remitted to the Funder first, and the remaining cash collateral and margin then being remitted to the Borrower.
Funder and Borrower may enters into a Finance Agreement whereby a facility is made available in an escrow account for the purposes of the purchase and export of goods. Security granted to the Lender are assignments of the Purchase Contract, the proceeds of the marine insurance, liens over the cargo itself and control over the Collection Account.