Monetizing An SBLC
After leasing an SBLC, you may want to monetise it. All that happens when you monetize an SBLC is the instrument is converted into legal tender. This can take up to 15 days to process and verify. Your bank should be able to do this for you. It wont be monetised for the full amount as it can vary on a number of factors such as; bank rating, country of issuance, LTV … etc..
The instruments must be in your name and there is a time limit on a leased SBLC’s. These bank instruments can only be leased for one year and one day. Bank instruments are checked for forgery and there are strict guidelines to adhere to. Heavy due diligence will be undertaken. Banks that issue fresh cut bank instruments must be UCP-600 compliant and be a top banking institution.
Purchasing A Standby Letter Of Credit
Purchasing an SBLC, it is similar to the process of leasing a StandBy Letter Of Credit. The main difference is that you own the instrument in your company /name. For example: The Provider is the asset owner, asset holder and asset controller. If you choose to purchase the SBLC, the title of goods will be transferred to you. Purchasing an SBLC is advantageous in that you can then choose to lease the instrument out if you so choose to do so. Ask us about our low cost SBLC’s that can be put into a managed trade platform.
SBLC Project Financing V’s Conventional Funding
Conventional funding can take a long period of time from submission to receiving funds for a project. The reasons can include;
A lengthy due diligence procedure and/or
Whether or not the funder has an appetite
Other projects in the pipeline thus having to wait a few months.
Financing projects with an SBLC can be a cheaper and faster route as the procedure takes a few weeks and is less onerous. Leasing a bank instrument can be also a cheaper as some investment banks charge thousand of dollars to fund a project.
Please note; it is our requirement that we ask you to provide Proof of Funds and/or a bank comfort letter. This is to demonstrate to the Provider that the companies we represent are in good faith and in trust to pay lease fees.
Swift Fees
When people apply for an Standby Letter of Credit most do not understand how the mechanism behind the transaction works. There are certain buyers who think that there are no fees involved when issuing a bank instrument and presume the SWIFT messaging service is free. This is not the case. The banks of both parties communicate as per the DOA agreement using SWIFT messages, recognizable to us as MT messages.
Please check on the search engines for SWIFT Fees (Link to another website with typical SWIFT charges). Sending a SWIFT message isn’t cheap, these are banks charges! We suggest that if you need an SBLC, prepare at least 12% of the asking amount to go towards the cost of an SBLC.
One way in which the buyer might not have to pay SWIFT Fees is by having the bank issue a Bank Comfort Letter (BCL). This letter just sates that the Buyer has the funds. This needs to be arranged before the DOA is signed.
Other Fees:
Depending on the Provider we generate our fee from the cost of the instrument. You may notice a purchase/lease price plus a commission price eg (10+2). The commissions are paid for any intermediaries/brokers. We keep our commissions low to Provide you with a fair deal.
Need A Large Bank Instrument?
If you need a Stand By Letter Of Credit for a substantial amount (ie in the Billions in tranches), we can arrange this for you on a case by case basis.
Information About SBLC Procedures
Please note that it is NOT advisable to change the SBLC Procedure written in the DOA. We are not in a position to dictate to our Providers how to operate their Procedures. We are able to give you a few choices on different Providers. Changing procedure terms can be frowned upon as it makes the validity of the SBLC enquiry questionable.
We have partnered with a firm to provide trade and commerce letters of credit for straight forward transactions. please let us know your requirements on the contact form.
How To Apply For A Bank Instrument
You can apply to have an Standby Letter Of Credit either through a bank or use our services. We can give you a number of low cost options to help fund your project. As our team has streamlined the process the paper work saving time and headaches! We can walk you through the process from start to finish.