STF (Structured Trade Finance is typically used in emerging markets and cross-border transactions. It is used for high-value transactions between bilateral partners. Lenders use STF to mitigate risks as it is possible to customize loans at various supply chain points. Lenders are assisted by STF while trying to protect the price volatility, supply shocks and demand changes. STF poses a reduced risk for lenders as it is self-liquidating.
Meanwhile, when you look from the point of view of the borrowers. STF works best in small businesses as the strength of the borrower is compared with the loan amount. STF offers a better security mechanism wherein every supply chain point is assisted with funds. This means that funding can be scaled up effortlessly whenever necessary for borrowers due to the flexibility of STF, and the payment periods can be extended. For lenders, it can reduce the exposure to commodity risks and prices.
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