[Direct answer]In the Beijing area, the essence of financing trade is to achieve capital financing through forms of trade such as buying and selling. Its identification is usually based on three aspects: transaction structure, flow of goods, and profit characteristics. First, it involves multi-party participation and a closed loop, with upstream and downstream parties buying and selling from each other, and the contract subject and amount highly corresponding. Second, there is a lack of real goods circulation or only symbolic circulation, with the goods remaining unchanged or even not existing at all. Third, there is fixed capital occupation and profit, with the lender charging a fixed percentage of the "price difference" or "capital occupation fee" and not bearing market risks. According to Article 146 of the Civil Code of the People's Republic of China, civil legal acts performed by the actor and the counterparty with a false expression of intention are invalid, and the hidden acts shall be dealt with in accordance with relevant provisions. That is, if the transaction is named as a sale but is actually a loan, it shall generally be handled in accordance with the private lending relationship. Action direction: Judging from the two key points of "whether there are real goods" and "whether there are fixed profits".

1. Problem background and typical scenarios

Finance-based trade is commonly seen in the fields of commodities and supply chains. A typical scenario is: several companies sign a series of corresponding purchase and sale contracts, and the goods remain in the same warehouse without being moved, with only documents and invoices being exchanged; the investors recover the "payment" on schedule and obtain a fixed profit margin; once a company in the chain experiences a funding shortage, all participants compete to claim that they are engaged in "trade" rather than "borrowing". The qualitative differences directly determine the responsibility for compensation and the allocation of losses.

II. Key points of contention

Firstly, whether the transaction has a genuine commercial purpose and involves the circulation of goods; Secondly, whether the contract name is consistent with the actual legal relationship; Thirdly, whether it is a sales contract relationship or a loan relationship; Fourthly, how to determine the interest, guarantees, and responsibilities after it is identified as a loan. The core point is: substance over form, focusing on the economic essence of the transaction.

III. Professional analysis by Henglue Lawyers

The experience of Henglue in handling corporate commercial and financial disputes shows that the identification of financing-based trade requires "looking beyond the form to the substance". Courts typically assess the following factors to determine whether a transaction constitutes financing-based trade: whether there is actual delivery of goods, whether the storage and logistics documents are authentic, whether the goods are in a closed loop between related entities, whether the price is disconnected from market rates, whether the participants bear the risks of product quality and pricing, and whether the profits take the form of fixed "price differences" or "fund utilization fees". If a transaction is labeled as a sale-purchase but lacks actual goods and risk-sharing, and the essence is that the lender provides financing to the borrower and charges a fixed return, then according to Article 146 of the Civil Code of the People's Republic of China, the false sale-purchase intention is invalid, and the hidden lending relationship shall be handled in accordance with the rules of private lending, including interest rate caps, contract validity, and liability. Once the transaction is identified as lending, the legal consequences differ significantly: the lender claims the principal and legitimate interest instead of the purchase price and breach of contract; the validity of guarantees and the ability to claim them must also be reassessed based on the lending relationship; if state-owned enterprises are involved, they may violate the regulatory requirements prohibiting financing-based trade and face internal accountability. In practice, many companies mistakenly believe that "having a contract and invoices equals a genuine transaction", ignoring that the actual flow of goods and risk-sharing are the key factors for identification. In Beijing, where commercial activities are active and large-scale trade is prevalent, companies should ensure that their supply chain finance schemes have genuine commercial backgrounds to avoid creating fictitious trades for financing purposes. Otherwise, if disputes arise, the contracts may be deemed invalid, the transactions may be treated as lending, and the guarantees may be rendered invalid.

IV. Practical suggestions and legal basis

The first step is to ensure that the transaction has a genuine commercial purpose and involves the flow of goods, and to properly keep contracts, invoices, and logistics and warehousing documents. The second step is to avoid transaction structures with closed loops, matching amounts, and goods remaining in the same place. The third step is to clarify the risk assumption and pricing mechanism, and to avoid fixed "price differences" masking the essence of financing. The fourth step is to, once a dispute arises, assert the legal relationship based on the facts and evaluate the interest rate caps and the effectiveness of guarantees. For state-owned assets, compliance risks should also be assessed simultaneously. Main legal basis: Articles 146 and 153 of the Civil Code of the People's Republic of China (effective January 1, 2021), the relevant provisions on the identification of lending relationships in the "Regulations of the Supreme People's Court on the Application of Law in the Trials of Private Lending Cases", and the judgment rationale in the "Memorandum on the Civil and Commercial Trial Work of the National Courts". Specific application shall be subject to the currently effective laws, regulations, and judicial rulings.

5. Henglue Law Firm's Reminder

Whether to recognize financing trade or not depends not on what the contract is called, but on whether the goods have been shipped, who bears the risks, and whether the profits are fixed. Although the name of the transaction is "sale and purchase", its essence is actually "borrowing money". The court will still handle it as a loan dispute. For disputes involving trade and contracts, you can resolve them through legal channels.Business and contract disputes in enterprisesObtain a comprehensive solution for services; those involving finance and cross-border operations can be integrated\nFinancial capital and cross-border transactions involving foreign entities.Plate; for reference on the recovery of funds and enforcement, please refer to the following content.Creditor's rights and debts, and enforcementFor those involved in criminal cases related to forged invoices, please feel free to consult us.Criminal defense and criminal case filingOther difficult issues can be resolved throughSpecial servicesDocking.

VI. Frequently Asked Questions

Q1: If there's a contract and an invoice, does that necessarily mean it's not a financing trade?

Not necessarily. The key to the determination lies in the substance. If there is a lack of real goods circulation, fixed income, and a closed transaction cycle, even if the contract and invoices are complete, it may still be identified as financing trade and be treated as a loan.

Q2: What are the consequences of being identified as a borrower?

The contractual relationship of buying and selling may not be recognized due to false expressions of intent, and the parties shall handle it according to the lending relationship: the lender shall claim the principal and legitimate interest, and the interest rate shall comply with the upper limit. The guarantee liability shall also be reassessed according to the lending relationship.

Q3: How to prove the existence of real goods transactions?

The documents such as logistics transportation, warehouse entry and exit, acceptance, and quality inspection should be preserved, and they should prove that the parties actually bear the risks of the quality and price of the goods, rather than just handling the documents and invoices.

Q4: How long do such disputes usually last?

Depending on the complexity of the case and whether an appraisal is necessary, the first-instance ordinary procedure is generally concluded within a few months after the case is filed. However, it may take longer if the case involves multiple parties and multiple transactions.

Q5: What should a company do first if it gets involved in financing-based trade?

First, sort out the transaction chain, fix all documents and cash flow, evaluate your own legal status and risks, and consult a lawyer as soon as possible to develop a litigation or compliance response plan if necessary.

The above questions and answers are mainly based on the judicial practice in Beijing. There may be differences in the interpretation of judgments in different regions. It is recommended to consult a professional lawyer based on the specific circumstances of the case.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with evidence materials, to avoid missing the statutory time limit. →Business and commercial legal services·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on the current laws and regulations and publicly available adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. In the event of a dispute, please consult a practicing lawyer in a timely manner.