The following Banking & Finance guidance note Produced in partnership with Sullivan provides comprehensive and up to date legal information covering:
This Practice Note looks at warehouse financing as a form of structured trade financing, which allows a producer or trader to borrow money, secured against the goods that it owns and which are stored within a warehouse.
A typical warehouse finance transaction involves a financier advancing a loan to a producer, as the borrower, and the borrower’s obligations are secured against its goods that are placed in storage. If structured correctly, the financing should be self-liquidating; that is, the loan is repaid using the proceeds from the sale of the secured goods in the borrower’s normal course of business.
Alternatively, a financier advances funds to a trader, as the borrower, who uses the funds to acquire goods from suppliers or producers and stores the goods in a warehouse. The borrower’s obligations are secured against the goods in the warehouse. The goods are sold and the proceeds are used to repay the loan.
A typical warehouse financing structure is as follows:
money is advanced by the financier to the borrower, usually as a percentage of the value of goods in storage
simultaneously with the first step, the borrower will grant security over the goods in storage in favour of the financier. The borrower may also grant security to the financier over any existing and future sale contracts which the borrower has and over any segregated
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