Warehouse finance (warehouse receipts)
Back to the Trade Finance Guide
Ossiano Guides · Instrument library
You store your goods in an independent warehouse, and a bank or trader lends you money against the warehouse receipt.
Terms like this have a quick explainer. Tap or hover on them.
01 · In plain words
Your stored goods become the security for a loan, through the receipt the warehouse gives you
lets you raise cash on goods you have in store. You put a commodity, such as grain, into a warehouse run by someone independent of you. A bank or trader then lends you money and relies on those goods to secure the loan (UNCTAD).
The warehouse gives you a paper or electronic warehouse receipt for the goods (UNCTAD; UNCITRAL). The receipt is proof that the goods are in the warehouse (GSCFF). You hand the receipt to the finance provider. Until you repay the loan, the finance provider legally owns the goods, holding to them. It gives title back only once the loan is repaid (GSCFF).
The finance provider lends only part of the goods' value. The part it keeps back is its , a cushion in case prices fall (GSCFF). It also asks for inspections and insurance on the goods (GSCFF).
Who is involved
- The owner of the goods, such as a producer, trader or processor, stores the goods and receives the loan.
- The warehouse operator stores the goods and issues the receipt.
- The finance provider, a bank or trader, lends against the receipt.
- Sometimes a holds or watches the goods for the finance provider under a (IFC).
- The buyer of the goods pays, and that payment repays the loan.
02 · How it works
Nine steps take the goods from the warehouse door to the buyer, with the loan repaid on the way
Figure 1 · Interactive
Warehouse finance, step by step
Read down the steps. The last step is where the buyer collects the goods.
Sources: UNCTAD, 2001; UNCTAD, 1996; GSCFF, Loan or Advance against Inventory, 2016; UNCITRAL, Model Law on Warehouse Receipts; IFC, Global Warehouse Finance Program.
03 · What it means for you
The owner gets cash before the sale, and the buyer must make sure the warehouse now holds the goods for them
Figure 2 · Interactive
What warehouse finance means for each side
Choose your side of the trade.
04 · Worked example
On $1 million of stored goods, an illustrative 70% advance gives a $700,000 loan
This example uses round, made-up numbers. 2,000 tonnes sit in the warehouse at $500 a tonne, so the goods are worth $1,000,000. The finance provider pays out 70% of that value. Interest is 6.00% a year for 120 days, counted on a 360-day year, the US money market (ARRC). Real terms vary by lender, commodity and country.
Figure 3 · Illustrative
A loan against 2,000 tonnes in store for 120 days
Illustrative inputs. The amount due is highlighted.
Made-up inputs, worked out by our checking script. The goods would have to fall to $350 a tonne before they are worth only the $700,000 loan.
05 · When to use it
Warehouse finance suits marketable commodities kept in a licensed, independent warehouse
Good fit when
- Your goods are a marketable commodity that the finance provider accepts (GSCFF), held in an independently controlled warehouse.
- You produce or trade farm goods and need short-term cash between harvest and sale (UNCITRAL; IFC).
- Your country's law treats warehouse receipts as a , as UNCTAD noted in 1996 for India and the United States (UNCTAD), or has a modern warehouse receipts law.
Another tool may suit better when
- You cannot check the warehouse, or it is tied to the owner of the goods. Forged receipts and goods that are never handed over are the risks here. Look at a broader inventory finance facility.
- The goods are hard to sell quickly. Lenders see that as a risk (GSCFF). An asset-based revolving facility looks at a wider pool of assets.
- You need money to grow or buy the crop before it is stored. Look at pre-export finance or structured commodity finance.
06 · Rules and a real case
Warehouse receipts follow national law and a 2024 model law, and a court has shown why the receipt must be real
The was adopted by UNCITRAL on June 26, 2024 and by the UNIDROIT Governing Council on May 8, 2024. It covers paper and electronic receipts alike. It sets duties for the warehouse operator, including care of the goods, keeping them separate and handing them over (UNCITRAL).
In the United States, the Warehouse Act defines a receipt to include an electronic receipt (7 U.S.C. 241). In some countries, government licensing and outside guarantees from bonding companies back the warehouse operator's honesty (UNCTAD).
A real case. A lender is only as safe as the receipt is real. In ED&F Man Capital Markets v Come Harvest Holdings, decided on February 16, 2022, the High Court of England and Wales looked at deals secured by warehouse receipts for nickel. The court found the receipts were forgeries (High Court judgment). Check the warehouse and the receipt before you rely on it.
A program example. Under its Global Warehouse Finance Program, IFC shares up to 50 percent of short-term loans to farm commodity producers or traders against warehouse receipts (IFC). IFC's April 28, 2010 project disclosure says the program takes the local bank risk in developing countries (IFC project 28749).
Summary
Warehouse finance turns goods in store into cash, as long as the warehouse and its receipt can be trusted
The owner of the goods gets a loan against the warehouse receipt, and the sale of the goods repays it. The finance provider lends only part of the value and holds title until it is repaid. The buyer gets the goods once the loan is cleared and the warehouse confirms it holds them for the buyer. Everything rests on a sound warehouse and a genuine receipt.
Related guides: Inventory finance; Financing agricultural commodity trade; Title and ownership in commodity trade; Structured commodity finance. Related cards: Inventory finance; Structured commodity finance. Every term is in the Trade Finance Glossary.
Sources
- UNCTAD secretariat, Potential Applications of Structured Commodity Financing Techniques for Banks in Developing Countries (UNCTAD/ITCD/COM/31), August 29, 2001. Supports: definition: a loan secured by goods in an independently controlled warehouse
- UNCTAD secretariat, Collateralized Commodity Financing, with Special Reference to the Use of Warehouse Receipts (UNCTAD/COM/84), July 2, 1996. Supports: the warehouse operator issues receipts; receipts as documents of title in India and the US; licensing and bonding
- Global Supply Chain Finance Forum, Standard Definitions for Techniques of Supply Chain Finance: Loan or Advance against Inventory, 2016. Supports: receipts as proof of storage, part-value advance, title until repayment, security agreement, inspections and insurance, short term, marketable commodities, disposal risk
- UNCITRAL, UNCITRAL-UNIDROIT Model Law on Warehouse Receipts (2024), June 26, 2024. Supports: adoption dates, paper and electronic receipts, warehouse operator duties, short-term farm finance
- US House of Representatives, Office of the Law Revision Counsel, 7 U.S.C. 241 Definitions (United States Warehouse Act), undated. Supports: a receipt includes an electronic receipt
- International Finance Corporation, Global Warehouse Finance Program (GWFP), July 2026. Supports: IFC shares up to 50 percent of short-term loans; collateral management agreements
- International Finance Corporation, Project disclosure 28749, Global Warehouse Finance Program, April 28, 2010. Supports: the program takes the local bank risk
- High Court (Comm), England and Wales, ED&F Man Capital Markets Ltd v Come Harvest Holdings Ltd [2022] EWHC 229 (Comm), February 16, 2022. Supports: the real case: forged warehouse receipts
- High Court (Comm), England and Wales, Mercuria Energy Trading v Citibank NA [2015] EWHC 1481 (Comm), May 22, 2015. Supports: receipts without attornment were not delivery
- Alternative Reference Rates Committee, SOFR "In Arrears" Conventions for Syndicated Business Loans, July 22, 2020. Supports: the 360-day year in the worked example
The real economy moves through Ossiano.
