Samuel Matthew's, head of solutions structuring, transaction banking, at Standard Chartered, article in The Asset magazine highlighted several key features in monetizing inventory and receivables .

Monetizing inventory
Can be achieved by basic methods:

• Borrowing from a bank against the security/pledge using the value of the inventory as collateral (via legally perfected hedge) taking into account the variations in the inventory value, as the company uses raw materials in production, sells the finished goods or adds to the existing inventory during procurement. Banks may allow the company to borrow up to a fixed percentage of the current value of the underlying inventory.
• Off -balance sheet/ commodity true sale solutions using either the bank's own balance sheet or a commodity arm to purchase the underlying commodity from a client with an in-built option for the client to repurchase it back at a point in the future.

Monetizing receivables
Receivables reflect post-sales trapped cash in the business. There are several ways to monetize this trapped cash, including:

• Financing against receivables/ factoring
• Insurance- or import factor-backed true sale of receivables in which banks purchase the receivables off the company's balance sheet via a true sale arrangement. Credit insurance and payment guarantees from import factors may be deployed by the bank to mitigate item level of portfolio risk.
• Securitization which typically involves a special purpose vehicle (SPV) setup solely for the purpose of said securitization opportunity into which the assets (i.e. receivables) are transferred and held. This SPV is typically a ring-fenced, bankruptcy remote entity.
• Borrowing base trade loans, which are secured against a list of current assets provided by the company. This list is referred to as a borrowing base certificate and is provided by the borrower or a 3rd part stock monitoring agent. The assets are typically secured by way of a floating charge and perfected under the applicable laws.

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