Nobody in the room argued that capital was scarce. The disagreement was over who can get at it.
Eleanor Hill, treasury editor at TTP, welcomed guests to the breakfast, hosted with Sullivan & Worcester. Geoff Wynne, who moderated, opened by looking ahead to the rest of 2026 and beyond.
Resilience costs working capital
Tanya Epshteyn, head of structured and trade finance at Czarnikow Group, said businesses had spent decades optimising supply chains for efficiency. Covid, the war in Ukraine and disruption in the Red Sea changed the calculation.
Companies now hold more stock, use more than one supplier and maintain alternative logistics routes. All of it consumes cash.
Czarnikow supplies food and beverage ingredients to multinationals, so the inventory it carries can be what keeps a customer’s production line running.
“The cost of resilience is not measured in basis points for SMEs,” Epshteyn said. “It is measured in working capital and its availability.”
Bank regulation can make that money harder to obtain. Products deemed illiquid become less attractive; structured trade requires collateral monitoring; monitoring requires infrastructure and staff. A viable SME trade can become too expensive for a bank to finance.
Epshteyn argued for lending against the trade instead. In receivables finance, the buyer’s credit strength can support the funding. Inventory finance can use warehouse receipts and controlled stock. A borrowing base can combine the two.
Technology helps when it gives lenders better information about inventory and collateral.
“The cheapest source of liquidity is often improved transparency,” she said.
She expects supply chains to become more regional and inventory to be treated less as an inefficiency. Both require funding. SMEs, meanwhile, need better reporting, management information and inventory visibility if they want lenders to finance them.
Lenders want control
Wynne invited James Lowrey, managing director and head of trade and working capital product at Lloyds Bank, to shoot the argument down. Lowrey declined.
His concern is control. Commodity traders have grown enormously, he said, and the largest can now compete directly with the banks financing them. They borrow cheaply through facilities such as revolving credit facilities, then deploy the money elsewhere at much higher margins.
Lowrey said know-your-customer checks should therefore mean more than compliance. A bank needs to understand the customer, its counterparties and its trades, including what the customer will do when circumstances deteriorate.
He separates ability to pay from willingness to pay.
Then came his three rules. “Control is happiness”: control the cash flows and the security, and make sure that security is perfected. “Verify, verify, verify”: the customer, its systems and its counterparties. And third: “Pay me back. Using language my mum would understand.” Lowrey wants to know the second, third and fourth exits if the first fails. “Without authentication you are not lending money,” he said. “You are betting money.”
AI and better data should make it easier to establish where financed goods are, whether on a vessel, in a port or in a warehouse. Lowrey still wants people to check.
“Nothing beats going to see and touch what you have financed on the regular,” he said.
“The world is flush with liquidity,” Lowrey said. Much of it is chasing the same group of large borrowers, weakening terms for the companies that need protection least.
Structure does not excuse you from having equity
John MacNamara started in commodities in 1982, drifted from trading into finance, joined the Royal Marines, then returned to the City. He now runs Carshalton Commodities.
Higher commodity prices mean larger working capital requirements and often more than one lender on a transaction. He said the market had moved from a “flight to quality” towards a “flight to size”.
But size still needs equity behind it.
MacNamara described a trader who approached him this year with an Irish backer, government support for strategic imports and a Nigerian supply route. Then MacNamara asked how much money the trader had put in.
“None at all. Not a sausage.”
His rule of thumb is that a trader needs enough equity to absorb the loss of one cargo, preferably two. The amount varies enormously by commodity. A West African crude cargo might require a trader with hundreds of millions of dollars behind it; steel or scrap needs much less.
Epshteyn agreed that borrowers need skin in the game but questioned how it should be measured. It might be equity or a haircut on the transaction. The equity figure also needs to be considered against turnover, existing debt and how quickly the assets can be realised.
MacNamara said advance rates among the biggest traders had risen over the years from 80 per cent to 95 per cent, then 99 per cent and eventually 100 per cent.
“We all did this, of course. We all said yes.”
The haircut was not the only thing to disappear. MacNamara said escalation clauses, which require a borrower to post more collateral or reduce exposure when agreed triggers are reached, had also fallen away. They provided a cushion that might only be needed once every five years, he said, but mattered when it was.
Insurance is not a substitute. Problems arise when finance is built around what MacNamara called a synthetic trade rather than an underlying transaction that genuinely needs financing.
“The fact you’ve got a structure and the fact you’ve got insurance does not absolve you from being bloody careful.”
Moving up requires more than equity
Lowrey pointed out that today’s top-tier commodity traders were second tier ten years ago. Companies do move up. The harder decisions come further down, where banks may refuse transactions that traders and funds will finance at another price and another point in the capital structure.
MacNamara described using equity, first-loss insurance and rated paper to create different layers of risk in a trade finance fund. Lowrey called equity a starting point rather than an answer: evidence that someone has put their own money at risk or persuaded someone else to do so.
A broker who also acts as an expert witness said lenders should pay more attention to the legal contract. He described a trade finance deal as a stool, with finance, insurance and law as its three legs.
An in-house lawyer from Bank ABC said smaller specialist banks can be more willing to read beyond standard templates. At larger banks, she said, a small deviation from the checklist can mean no.
Wynne came back to it twice. Lenders say they only lend to borrowers with a track record. “How does a track record borrower get to have a track record if you won’t lend to him?”
One answer came from the floor. A funder said his firm starts smaller companies on back-to-back letters of credit, then moves them up to warehouse financing as their equity grows. Asked whether that meant taking on a borrower with no track record, he said yes.
“Well, if you talk to the banks in this room, they won’t.”
