Asset Based Loan For Toronto Coffee Trader

Business is a commodity trade finance lender/arranger based in New York, USA.
Business is seeking a senior secured lender, to co-lend with Business on $1 million short-term asset-based loan facility for a Kenyan coffee trader based in Toronto.
Below is a summary of the credit facility.

- Borrower is a Toronto based small agri-commodity trader.
- Kenya coffee is considered premium coffee worldwide and demand is strong. High liquid value.
- Borrower buys coffee in Kenya and sells to a buyer, a reputable agri-commodity trader in Vancouver, Canada.
- Financing is secured voyage finance for approx 60 days per shipment.
- Each shipment’s secured loan amount for 2 containers (approx 40 tons) is approx $90,000.
- Load port is inland Nairobi to Vancouver for approx 100 days.
- Shipment occurs once a month on continuous basis under [1] year term contract.
- Thus, 2 overlapping shipments is $180,000 (= $90,000 x 2 shipments).
- We anticipate many more containers per shipment.
- Loan advance is made when supplier delivers the coffee at rail port in Nairobi.
- Loan is made against a house bill of lading issued by Hapag Lloyd.
- Loan repayment occurs at destination port, where the bill of lading is released only after receipt of payment from buyer.
- Senior Secured Lender to provide 85% of each loan.
- Business will provide 15% of each loan as a junior secured lender.
- Business will document the agreements and book/administer the loans.
- Business junior tranche is subordinated to the senior secured tranche.
- Upon a default, Hommocks receives repayment only after Senior Secured Lender is fully repaid.
- Senior Secured Lender interest rate is SOFR + 10%pa. Current SOFR is approx 5.35%pa.
- Thus, all in rate is 15.35%pa (=10% + 5.35%) currently.
- There will be a floor SOFR of 3.5%pa.
- Established in 2021, Borrower has $150K in sales, $150K total assets and $27K equity.
- 3 full time employees, 3 part time.