Advising a Client on a Freight Finance Transaction

Client

Our client OnePort 365 Limited is a logistics company specialising in freight transportation services for businesses across international markets. To support a long-term customer’s expansion, they sought to provide financing under a Freight Finance Agreement, enabling the customer to scale their operations. 

Problem

The client required legal advice on structuring the Freight Finance Agreement to lend an undisclosed sum to their customer. The agreement needed to clearly define the repayment terms, collateral, and default provisions to protect the client’s financial interest and ensure timely repayment. The client also wanted to minimize its exposure to risk while ensuring the customer had sufficient flexibility to repay the loan based on their cash flow.

Approach

We developed a bespoke approach to structure the Freight Finance Agreement, ensuring it balanced protection for the client’s financial interest with the customer’s need for flexibility. Our approach included:

1. Risk Assessment and Cash Flow Analysis: We conducted a detailed risk assessment of the customer’s business and projected cash flow to determine the most appropriate repayment schedule. This allowed us to align the loan terms with the customer’s ability to repay while minimizing default risk for the client.‍
2. Collateral Structuring: To mitigate the client’s risk, we advised on securing the loan with appropriate collateral. We structured the agreement so that the customer’s freight assets and revenue streams would serve as security, ensuring the client could recover funds in the event of default.‍
3. Repayment Terms and Default Provisions: We drafted clear and enforceable repayment terms that tied directly to the customer’s cash flow cycles. This ensured that while the loan remained flexible, it included specific triggers for default, giving the client the ability to act swiftly should any repayment obligations not be met. The default provisions also outlined a detailed recovery process, including liquidation of collateral if necessary.‍
4. Interest Rates and Penalty Clauses: To further protect the client, we structured the interest rates to reflect market conditions and the risk level of the loan. Additionally, we included penalty clauses that would incentivize timely repayments by the customer.‍
5. Negotiation and Execution: Once the structure was finalized, we negotiated the terms with the customer on the client’s behalf to ensure all parties were aligned. We also assisted with the execution of the agreement and provided guidance on monitoring the loan throughout its term.

Result‍

The Freight Finance Agreement was successfully structured and executed, providing the client with a secure loan framework while offering the customer sufficient flexibility for repayment based on their cash flow. The agreement’s well-defined repayment terms and collateral provisions minimized the client’s exposure to risk, giving them confidence in the loan’s security. As a result, the client was able to support their customer’s growth without compromising their own financial position.