Percent is excited to announce that specialty finance company TradeBacked has joined our platform as an underwriter. TradeBacked provides asset-based liquidity to cash-flow positive businesses. The company serves small- and mid-sized enterprises (SME) that need short-term capital, funding the businesses in exchange for their marketable assets, i.e., their inventory. With over $200 million in deals in the pipeline, TradeBacked focuses on SMEs having a minimum of $50 million in annual revenue. TradeBacked clients are manufacturers and traders of commodities such as metal, minerals, oil and gas products, chemicals, fertilizers, non-perishable agricultural products, and luxury goods such as luxury watches and cars.Â
A growing trade finance gap – post-pandemic, businesses need trillions to grow
Over the past few years, companies have struggled to adequately fill their trade finance needs. Globally, the trade finance “gap” — the amount of money available versus the optimal amount needed by businesses — was estimated at $1.5 trillion in 2020, a figure estimated to have grown by trillions following the pandemic.1 SMEs face many obstacles in obtaining financing to support their growth and TradeBacked has a differentiated product to bridge the gap.
TradeBacked, with an operational footprint in major trading hubs including the U.S., Dubai, London, Singapore, India, and Hong Kong aims to close that gap by helping established businesses — those with sound governance and strong business practices — access the funding they need.
TradeBacked provides capital to only U.S.-based entities, which may be the SME’s parent or subsidiary entities. Thus, keeping the jurisdiction local and transactions in U.S. dollars. At the same time, it has the ability to acquire collateral internationally. TradeBacked acquires and takes physical possession of the collateral.
Insuring trade capital for commerce
Unlike most inventory and trade finance firms, TradeBacked secures insurance as a strategic asset to de-risk unique inventory financing. We recognize that comprehensive protections must be in place for investors to have confidence in deploying capital into unfamiliar sectors.
TradeBacked designs an insurance product with Rated A-exceptional companies, including Relm Insurance, which provides double protection to our investments:
- TradeBacked maintains a robust corporate policy shielding against general liabilities, directors and officers, errors and omissions, cyber, and default of up to a certain amount.
- We also secure specialty transactional coverage to insulate each deal. This way, asset and default risks are covered to ensure investors are made whole if goods or counterparties falter.
TradeBacked partners with A-rated carriers to structure policies precisely honed for each commodity and jurisdiction. Inventory is insured at reputable third-party warehouses. Default risk is protected via tailored trade credit solutions. The resulting coverage framework fuels TradeBacked’s capacity to provide financing in sectors or regions where others perceive only uncertainty.
Insurance transforms potentially speculative ventures into secure, fully hedged opportunities. By leveraging policies spanning corporate and transaction risks, TradeBacked unlocks investment opportunities otherwise too uncertain for conventional capital sources. Insurance provides the requisite guardrails for investors to fund global trade confidently.
TradeBacked wants to responsibly grow together with emerging businesses
TradeBacked provides $100,000 to $5 million of capital for inventory repurchase agreements and focuses exclusively on businesses with established commercial operations. Generally, they structure short term capital for SMEs with a maturity range of 90 days to one year, fully collateralized by the businesses’ existing inventory that is stored in reputable, insured warehouses. To further protect investments, the inventory is covered by tailored-made insurance for defaults, fraudulent activities, inventory price drops, fire, burglary, and other general insurance issues.
TradeBacked performs thorough due diligence on all prospective clients, including the review of the company’s legal registration documents to ensure the business has established commercial operations and is compliant with local regulations. TradeBacked reviews at least three years of financial statements, to assess the company’s financial health, profitability, liquidity, and solvency. TradeBacked also looks at a company’s existing credit lines and relationships with banks to provide insights into its creditworthiness.
TradeBacked also vets key management personnel, including direct conversations with the company’s management and in almost all cases, requests a third-party vendor to conduct a background check on founders or key personnel. TradeBacked also examines a company’s top vendors and customers, to gauge the stability and reliability of the company’s revenue streams and supply chain. The firm also conducts a trade cycle analysis to gauge how the company’s trade cycle works, from procurement to sales, to provide insight into operational efficiency and potential risks.
Alongside its diligence process, TradeBacked requires its clients to undergo credit analysis with reputable third parties such as Dun & Bradstreet, CRISIL, S&P, and EY.
If the due diligence process is successful, TradeBacked will then issue a term sheet outlining the terms and conditions of the potential agreement or investment. For its first offering, TradeBacked is pleased to introduce Percent investors to FirstTrade, a U.S. and Dubai-based wholesaler of metals and petrochemicals, and other goods. This inaugural deal offers investors exposure to Zinc, which is a London Metal Exchange (LME) registered product stored at an LME-registered warehouse.
1“Greasing the wheels of commerce—Trade finance and credit,” World Bank Blog, February 9, 2023