Structured Trade & Commodity Finance (STCF)

Posted Leave a commentPosted in Finance

As a previous Banker, Trade Finance was and still is the swiftest cash conversion cycle (CCC) supported by volumes with Africa’s wealth in commodities makes this a lucrative industry for Traders.

As a conventional financer who has limited appetite for risk and is majority focused on providing innovated solutions to increase and maintain market share it is evident that there is a market failure to provide funding mechanisms and bespoke solutions to service the STCF market.

This lead to numerous boutiques and trade financing houses being established albeit due to the many various disciplines a Trade Financier required, credit focuses on liquidity versus NAV , legal (UCP 600 / URDG 758), industry specialist, logistical & warehousing, collateral management, financial acumen supported by Structuring versus vanilla trade finance would make it challenging for the gap to be serviced by any boutique or trade financing houses as this is perhaps the same reasons that lead to an opportunity for a STCF to service this market.

The STCF financier would services this market would need to be capitalized through upstream funding whereby Product and Weighted Average Cost of Capital (WACC) would favor the commodity industry, these are preferably done in LIBOR to reduce the interest bill (NII) albeit is occasionally done by financiers and those who are prepared to assume the risk often are private equity or 3rd party financier with a high IRR which erodes the liquidity or the ability for a STCF financier to service the market with a foresight versus hungry shareholders or 3rd tier capitalizers.

 

The STCF has huge opportunities of a CCC of 3-4times per/a supported by a growth year on year of 10% versus a stagnant 15-20% every exists, for Philanthropist and investors with foresight who would like to capitalize of the IP of Wellstone Capital as a fund manager , we will welcome engagements.

 

Business Plan Financial Feasibility vs Presentation

Posted Leave a commentPosted in Advisory

As a envisaged new entrepreneur looking to start your own business or invest into a going concern. With the simplistic Search Optimisation Engines (SOE) accessing business plan templates for free or at a cost has become available to entrepreneurs at a click of a button. There business plan variation is visual appealing, has the basic of a Business Plan 101 and attracts the untrained entrepreneur.

As business plans become more commercially available over the counter which everyone appears to become a sales individual specialist of business plans, what entrepreneurs should look out for is the ability to focus on the following:

  1. The ability to access finance from the local country;
    1. owners equity contribution vs collateral on offer;
    2. business valuation if acquiring shares in a going concern;
  2. The competitive variable in country;
  3. The ability to bring into account all costs to calculate total Weight Average Cost of Capital (WACC) especially for Import or Export effected companies direct or indirect;
  4. The sales individual of the business plan provides no form of comfit or guarantee for the business plan to access;
  5. The request for 100% pre-payment for the business plan;

The guarantee of a business plan is critical irrespective if it will be utilised to access funding or for operational efficiencies which a procurement of a template/s or from an sales individual or organization without any guarantee or access or funding or utilised as a operation efficiency is warning signs prior to outflow of your cash.

commodity market

Posted 1 CommentPosted in Commodities

A ‘commodity market‘ is a market that trades in primary rather than manufactured products. Soft commodities are agricultural products such as wheat, coffee, cocoa and sugar. Hard commodities are mined, such as gold and oil.[1] Investors access about 50 major commodity markets worldwide with purely financial transactions increasingly outnumbering physical trades in which goods are delivered. Futures contracts are the oldest way of investing in commodities. Futures are secured by physical assets. Commodity markets can include physical trading and derivatives trading using spot prices, forwards, futures, and options on futures. Farmers have used a simple form of derivative trading in the commodity market for centuries for price risk management.

A financial derivative is a financial instrument whose value is derived from a commodity termed an underlined. Derivatives are either exchange-traded or over-the-counter (OTC). An increasing number of derivatives are traded via clearing houses some with Central Counterparty Clearing, which provide clearing and settlement services on a futures exchange, as well as off-exchange in the OTC market.

Derivatives such as futures contracts, Swaps (1970s-), Exchange-traded Commodities (ETC) (2003-), forward contracts have become the primary trading instruments in commodity markets. Futures are traded on regulated commodities exchanges. Over-the-counter (OTC) contracts are “privately negotiated bilateral contracts entered into between the contracting parties directly”.

Exchange-traded funds (ETFs) began to feature commodities in 2003. Gold ETFs are based on “electronic gold” that does not entail the ownership of physical bullion, with its added costs of insurance and storage in repositories such as the London bullion market. According to the World Gold Council, ETFs allow investors to be exposed to the gold market without the risk of price volatility associated with gold as a physical commodity