Warehouse Financing

Warehouse Financing (WF) is a structured method of financing, wherein funds are extended to manufacturers and processors based primarily on the underlying asset - commodities as identified by a warehouse receipt issued by an independent collateral manager appointed by the Bank. At present, HSBC is offering short term financing against warehouse receipt for Cotton Bales, Castor Seed, Cashew nuts, Pulses, Paddy / Rice, Maize, Mustard Seed, Soyabean Seed and Wheat.

The objective of WF is to partially transfer the credit risk from the borrower to the underlying commodity and adding risk mitigants in order to deliver the following benefits to the borrower:

• Leverage the strength of its raw material (commodity) by using it as the primary collateral
• Get a structured pricing which is more attractive than adhoc working capital or adhoc short-term loans
• Get financing in tranches aligned with the stock build-up schedule
• Repayment schedule aligned to actual usage of raw material.
• No additional collateral required for availing this facility.

The borrower is required to deposit and pledge the commodities in favour of the bank, in a warehouse identified by the borrower and approved by the Bank. The Bank appoints a collateral manager, who issues a warehouse receipt in favour of the borrower, certifying the quality & quantity of the commodities stored. The Bank on the basis of the warehouse receipt disburses the corresponding loan amount to the borrower.

Taking into account the seasonal nature of selected, HSBC has setup processes to enable faster turnaround for processing and approving loan application as well as faster turnaround time for actual disbursement of the loan.