ITFA launches the ITFA Short Term SWIFT FI Trade Loan template

ITFA is yet again pleased to launch a new template that aims to support and streamline trade finance transactions.  

Short term trade loans, documented via SWIFT 799 free-form message types, have long been used between banks operating across multiple jurisdictions. These have typically covered one or more underlying commercial transactions for corporate clients of the borrowing bank – often in emerging market countries – and provide a simple and effective way of obtaining short term financing for the borrowing bank in foreign currency.

To date, however, there has been no industry guidance on how this stand-alone loan can be documented. Most banks have developed their own formats, which vary depending on the jurisdictions in which they operate.

The aim when setting up the ITFA working group that produced this template was to provide an example of “what good looks like”, while accepting that it cannot – and does not intend to – cover every permutation or eventuality. Instead, it provides an off-the-shelf starting point for a borrower bank and lender bank entering into a new relationship and looking to document a short term trade loan via SWIFT.

The working group aimed to keep the wording as short as possible, while also providing useful guidance and suggested alternatives for specific situations, such as floating-rate loans with periodic interest rate resets and different governing law options, to name but a few.

It should be noted that this template is not designed to replace any other documents, for example, the BAFT Master Trade Loan Agreement (MTLA), which operates on the basis of a master framework executed bilaterally under which individual loans are executed. In contrast, this template is intended for standalone, one-off loans solely documented via SWIFT messaging.

A big thank you goes to Geoff Wynne at Sullivan, who held the pen on the drafting of the template, and to the many members of the working group who contributed their valuable experience and opinions in shaping its content – including decisions on what to include and, just as importantly, what to leave out! We would also like to thank James Collins for his ongoing contribution, and FCMB Bank (UK) Limited, which kindly volunteered its trade loan format as the starting point for the working group’s discussions.

ITFA members can download the document, which comprises the template and guidance notes here.

Any questions should please be addressed to the ITFA Market Practice Committee: info@itfa.org.