Content

What is Coffee Trade Finance?

Global demand for coffee has exceeded worldwide production for the last four years, leading experts to forecast robust average growth figures for the next five years. Trade Finance Global has supported a number of coffee traders constrained by cashflow issues to fulfil their obligations to suppliers through the provision of trade finance, and can help buyers looking to conduct time-sensitive procurements of coffee products using a series of specialist trade finance tools.

Coffee Trade Finance

Although Starbucks executives spoke somewhat hastily when describing coffee as the world’s “second most-traded commodity after oil” in 2017, global demand for coffee remains enormously high. Coffee is grown all over the world, including in regions renowned for instability, which has led to the creation of lengthy and sophisticated supply chains managing the harvesting, roasting, grinding and transportation of coffee to its major export markets. Moreover, changing climate conditions worldwide as a result of shifting global temperatures are causing issues for farmers reliant on specific ecological and meteorological conditions for the production of quality coffee beans, particularly the specialist crops increasingly being demanded by affluent American customers.

Coffee Trading

Operating within this environment of consistent demand and fluctuating supply, coffee traders continue to conduct high-value international transactions involving large quantities of the commodity. Conducting such transactions can be extremely daunting, as the transactions themselves bring great risks to sellers and buyers reliant on one another to fulfil their contractual obligations, and the lengthy delays in payment caused by global transportation of goods can place the accounts of coffee traders under large amounts of fiscal pressure. Trade Finance Global can provide flexible finance on the basis of accounts receivable to any creditworthy trader, allowing them to support first time international coffee traders or experienced coffee importers or exporters looking to expand the volume of trade they conduct. Moreover, by acting as a middleman between buyers and sellers, trade financiers can help to mitigate the inherent risk within the transaction to ensure the security of firms’ financial investment.

Products financed

Key coffee products financed include:

• Coffee, whether ground, unroasted or roasted
• De-caffinated coffee
• Coffee-derivative product or products containing coffee in trace
• Coffee beans
• Cacao

Coffee Finance Requirements

• Your business has a healthy trading history
•  Your business can prove it is creditworthy
•  You have identified customers willing to transact with you on a credit-based basis

How the transaction works

After assessing the operational risk of a proposed international venture, TFG will reach out to its global network of sources of private finance to find lenders interested in the proposal. Working with investors and the firm in question, they will construct a bespoke finance package well suited to servicing coffee traders needs, for two reasons. First, TFG can arrange finance on the basis of a firm’s accounts receivable to eliminate any requirement for stringent capital guarantees to be provided to access commercial finance. Instead, the profitable order or the goods themselves are often used as the collateral for the loan, handing firms increased financial flexibility in their accounts. Moreover, extended repayment terms on the finance allow buyers to repay TFG from the profits they raise on the receivable once TFG has successfully overseen the transaction, paid the supplier on receipt of the correct documentation, and ensured the buyer has received their shipped goods.

What is the SIC Code for Trade in Coffee?

Speak to our trade finance team