Major Changes in Trade Finance – ValleyRoad Introduces MTFs
Traditional trade finance relies on short term revolving and self-liquidating credit lines provided by banks. The 2008 crisis and its consequences of increasingly restrictive regulations have put pressure on banks to deleverage. This in turn has significantly impacted trade credits and traders.
Trade finance plays a vital role in the economy as it allows commodities to be moved from suppliers to clients and into products. Given the current credit restrictions, players have no other choice than innovating with non-bank investors. Even if promising alternatives are emerging, they are still very limited, suffer from problematic disorganization and do not fully respond to small/medium traders’ needs.
Consequently, there is a great opportunity for new actors in offering alternative financing facilities to established trading houses at higher yields, through Mezzanine Trade Finance (MTF). There is an interesting opportunity for seasoned investors to place money at 90 days, with a revolving option, and cash in on interesting yields in Swiss Francs (above 9%), a currency of choice for stability.
ValleyRoad Capital is pioneering MTF’s as a new segment of Private Equity investments.