TRANSFORMING BUSINESSES ACROSS SECTORS AROUND THE WORLD
All SBLC/BG are Asset/Cash backed. A newly created SBLC/BG is called "Fresh Cut" whereas an already existing SBLC/BG is called "Seasoned". Whether purchased of leased, SBLC / BG is issued for a “term” having validity normally for 1 year and 1 day which may extend up to multiple years depending on the Provider’s own discretion and Provider’s level of comfort with the Beneficiary.
Most banks will issue an SBLC/BG to any of its customers if they have sufficient (100% of Face Value of the Instrument) liquidity (cash) in their bank account or available balance in their credit line (if they are already availing a credit line from the bank). It’s a complete myth that “Banks Do Not Issue SBLC/BG). This direct transaction between a client and his bank is the “Primary Market” transaction.
Providers of SBLC/BG generally are a part of the “Secondary Market” transactions. SBLC/BG Providers are high net worth corporations or individuals who hold bank accounts at the issuing bank that contain significant cash sums (assets). SBLC/BG Provider would often be a collateral management firm, a hedge fund, or private equity company.
Banks, in general, will monetize only an “owned/purchased” SBLC/BG. They will not monetize a “leased” SBLC/BG. In contrast to a purchased or owned SBLC where the buyer becomes the official owner of the instrument and in turn would be able to lease the SBLC out to a Third Party, a "leased SBLC" cannot be "leased out" any further.
A key purpose of the widespread use of standby letters of credit to finance commodity transactions is the comfort it gives to the seller that it will receive payment. The drafting of the SBLC/BG should provide that the presentation of a demand would be conclusive evidence that the amount claimed was “due and owing” to the Beneficiary of the SBLC/BG. The beneficiary’s belief that payment was “due and owing” should activate payment.
We generally do not accept applications from brokers or intermediaries. All SBLC/BG applicants are first required to engage us as their sole and exclusive SBLC FACILITATOR for obtaining SBLC/BG through us. Our services are no longer free and clients seeking SBLC/BG need to pay for the compliance we undertake once CIS/KYC form is received by us. This also helps us keep myriad of joker brokers who have absolutely no knowledge of how things work in this industry.
Buying or Leasing SBLC : Looking for a genuine and reliable Provider to buy or lease a Standby Letter Of Credit (SBLC) or a Bank Guarantee (BG)? Well, your search ends here and there isn't any need to look further. We are experts at handling issuance of SBLC/BG and we have successfully done it many times over. Corporations, Airline Operators, Investment Bankers, Energy Companies, Project Owners, Miners, Oil & Gas Traders, Commodity Traders, etc. have successfully obtained SBLCs/BGs through us. We firmly believe that all our clients must receive correct and complete information about SBLC or BG prior applying for these extremely complicated financial instruments. If you follow our procedure, it is likely that you might obtain an SBLC/BG provided you are financially capable to transact and possess the right business credentials. We are supported by some very well established and wealthy corporations, Institutions, funds, and High Net Worth Individuals (HNWI) around the globe who act as our Providers. We generally do not accept applications from brokers or intermediaries. All applicants first need to engage us as their sole and exclusive SBLC FACILITATOR for obtaining SBLC/BG through us. Before proceeding, we strongly recommend one reads through the information below:
Standby Letter of Credit (SBLC)/ Bank Guarantee (BG) is a guarantee of payment issued by a bank on behalf of a client that is used as "payment of last resort" should the client fail to fulfill a contractual commitment with a third party. Standby letters of credit are created as a sign of good faith in business transactions and are proof of a buyer's credit quality and repayment abilities. The bank issuing the SBLC performs brief underwriting duties to ensure the credit quality of the party seeking the letter of credit, then sends notification to the bank of the party requesting the letter of credit (typically a seller or creditor).
A standby letter of credit shows a company’s credit quality and ability to repay loans. Although SBLC/BG is not intended for use as a replacement for immediate cash payment obligation, it helps fulfill business obligations in case the business stops operations, cannot pay its vendors or becomes insolvent.
Small businesses often face difficulty when securing financing. For this reason, Standby Letters of Credit may be especially beneficial for encouraging investors to lend money to such a company. In case of default, investors are assured they will be paid the principal and interest from the bank through which the SBLC/BG is secured.
Standby Letters of Credit are issued for use in a wide variety of commercial and financial operations. Standby Letters of Credit are very much alike Documentary Letters of Credit (DLC). The main difference between a Documentary Letter of Credit and a Standby Letter Of Credit being that unlike DLCs, SBLCs only become operative in case the applicant defaults. In case of default, the beneficiary in whose favor the SBLC was issued, can draw on the SBLC and demand payment.
Historically, Standby Letters of Credit were developed because the US regulator legally limited US bank’s authority to issue Bank Guarantees.
SBLCs are also very similar to Bank Guarantees (BG), which too require that the presentation of stipulated documents be compliant with the terms and conditions of the Bank Guarantee. SBLC’s and Bank Guarantees are different in terms of protection, they both serve the primary purpose of making sure that sellers get paid, but while a Standby Letter of Credit protects the seller, a Bank Guarantee (BG) protects both sides, since it also protects the buyer in case the supplier never ships the goods or ships them in a damaged condition.
When requesting a SBLC, a business owner proves to the bank he is capable of repaying the loan. Collateral may be required to protect the bank in case of default. The bank typically provides a letter to the business owner within one week of receiving documentation. The business owner must pay a SBLC fee for each year that the letter is valid. The fee is typically 1-10% of the SBLC value. If the business owner meets the criteria outlined in the contract before the due date, the business owner can cancel the SBLC without further charges.
Standby Letters of Credit (SBLC) are a very flexible tool, making them a suitable product for securing a wide range of payment scenarios. A financial SBLC, the most common type, is typically used in international trade or other high-value purchase contracts where litigation or other non-payment actions may not be feasible. A financial SBLC guarantees payment to the beneficiary if criteria outlined in the contract are left unfulfilled. For example, an exporter sells goods to an overseas buyer who guarantees payment in 30 days. When the payment does not appear by the deadline, the exporter presents the SBLC to the importer’s bank and receives the payment.
A performance SBLC ensures the time, cost, amount, quality of work and other criteria are fulfilled in a manner acceptable to the client. The bank pays the beneficiary if any of the written obligations are unmet. For example, a contractor guarantees a construction project will be finished in 90 days. If work remains incomplete after the 90-day period, the client can present the SBLC to the contractor’s bank and receive the payment due.
The SBLC should not be confused with the documentary credit which is instead a means of payment since the buyer goes to his bank and asks him to pay the seller at a given moment, ie on a date or to the fulfillment of a condition (delivery for example).
HOW DOES SBLC WORK?
While trying to buy or lease SBLC or BG, one must understand the importance of the following:
1. Beneficiary submits to Subcontracts India a signed official Letter Of Interest (LOI) for applying for SBLC/BG together with compliance documents:
1.1 Client Information Sheet (CIS)
1.2 Statement of Non-Solicitation of Funds
1.3 Irrevocable Fee Protection Agreement covering all identified beneficiaries/ intermediaries from both sides
1.4 Clear color copy of the beneficiary’s/Signatory’s passport
1.5 Certificate of Incorporation of beneficiary’s company
1.6 Proof of fund (POF): There must be availability of cash funds (not credit line) in the beneficiary's bank account sufficient to cover at least the price of the first tranche of the instrument. This can be in the form of a Bank Comfort Letter (BCL) or RWA (ready, willing, and able) letter issued by the beneficiary's bank and signed by at least two bank officers, or a screen shot of the account statement no older than three days from the date of filling the CIS.
2. After thorough and extensive due-diligence of the applicant/beneficiary and subsequent approval by the Provider, applicant/beneficiary will receive the Deed Of Agreement (DOA) Format which spells out Terms and Conditions of the Contract, approved contract amount (Face Value), Individual tranche size and schedule, Price, etc.
3. The applicant/beneficiary completes the Deed of Agreement (DOA):
a. Accepting the SBLC price.
b. Confirming applicant’s/beneficiary’s bank will accept the Provider’s Corporate Invoice
c. Confirming acceptance of SWIFT MT799 BPU verbiage.
d. Confirming the Intermediary Fee Protection Agreement
e. Confirming the acceptance of the SWIFT MT760 (SBLC) verbiage
The filled & signed DOA must be returned on beneficiary’s letterhead & sent to Subcontract India via e-mail duly signed in blue ink and stamped on each page
4. After internal scrutiny and evaluation of the filled DOA received from the applicant/ beneficiary, the Provider might undertake another due-diligence of the applicant/beneficiary. Once satisfied, the Deed Of Agreement (DOA) would be countersigned by the Provider after filling in all the relevant information relating to the Provider and his Bank, and returned to either the applicant/beneficiary for lodging it in his bank or to the applicant’s/beneficiary’s bank directly
5. The fully executed Deed Of Agreement (now lodged with Provider’s and Beneficiary’s respective banks) becomes the legally binding contract between the two parties.
6. The Provider will issue a Corporate Invoice to the Beneficiary’s bank showing the all-inclusive amount of the SBLC/BG price and commissions to be paid after the SBLC/BG has been delivered via SWIFT MT760.
7. The beneficiary’s bank will send a written confirmation via SWIFT MT799 to the Provider’s bank stating that “it is RWA (ready, willing and able) to receive the SBLC/BG as per the Deed Of Agreement.
8. Provider’s Bank will acknowledge the receipt of the SWIFT MT799 RWA send a counter MT799 RWA to the Beneficiary’s bank confirming it is ready, willing and able to send the SBLC/BG Pre-Advice via SWIFT MT799 to the Beneficiary’s Bank.
9. Within three (3) banking days, the Provider’s bank will issue the SWIFT MT799 Pre-Advice confirming that the instrument will be delivered against the issuance of SWIFT MT799 BPU (bank payment undertaking) by the beneficiary's bank.
10. Beneficiary’s Bank will send the SWIFT MT799 BPU (Bank Payment Undertaking earlier used to be called ICBPO) as per the verbiage earlier provided in the DOA to guarantee payment for the Corporate Invoice after delivery of the SBLC/BG to beneficiary’s bank (Note: ICBPO is now banned)
11. Within five (5) banking days after Provider’s bank receives and authenticates the SWIFT MT799 BPU, the Provider’s bank will deliver the SBLC/BG via SWIFT MT760 and also provide the copy of the SWIFT message via bank e-mail.
12. Within Five (5) banking days after the SBLC/BG is delivered and received by Beneficiary’s bank via SWIFT MT760 and is authenticated, the beneficiary’s bank will activate the Bank Payment Undertaking and pay the Provider via SWIFT MT103. The hard copy of the SBLC/BG to be delivered via bank bonded courier to the beneficiary’s bank within seven (7) days after the payment being received by principal’s bank.
13. The beneficiary pays xxxxxxx percent all inclusive (xx% + 2%) of face value of each tranche, as per the relevant irrevocable fee protection agreement .
14. All subsequent tranches will be based on the same procedure, until the agreed amount of the contract with Provider reaches completion or the collateral or funds become exhausted.
15. Any unauthorized bank calls without prior agreement between parties, probes or communications, or an improper solicitation or disclosure involving any of the banks concerned in this transaction will result in immediate cancellation of this transaction and subject the violating party to damages.
GENERAL PROVISIONS AND CONDITIONS:
IMPORTANT: THE TRANSACTION PROCEDURE AND THE TERMS AND CONDITIONS KEEP CHANGING. GET IN TOUCH WITH US FOR LATEST UPDATES
Standby Letter of Credit or Bank Guarantee (SBLC/ BG) Providers are mostly active in the secondary and the tertiary markets. But how does one find a genuine/reliable Provider for SBLC/BG ? To understand who these Providers are and how they function, one must understand about what is called as Collateral Transfers in the financial world. Collateral Transfer is basically the provision of transferring assets from one party (the Provider) to another party (the Beneficiary) often in the form of a Bank Instrument (BG or SBLC). This occurs whereby the Provider agrees (through his Issuing Bank) to issue a “Demand Guarantee” to the Beneficiary in return for a “rental” or “return” generally known as the “Contract Fee”. The parties agree to enter into a Collateral Transfer Agreement (CTA) which governs the issuance of the guarantee.
A Provider for SBLC/BG would often be a collateral management firm, a hedge fund, a Finacial Holding Company (FHC), a non-bank commercial company, or private equity company. They are high net worth corporations or individuals who hold bank accounts at a bank which holds either large sums in cash deposits, bonds, or other for of security that can turn into legal tender. Basically, in most cases these are liquid assets at the immediate disposal of their owner. Whenever the occasion arises, a Provider instructs his bank to secure and encumber liquid assets/ cash in his own account and authorizes the bank to "cut" (an industry term meaning to create a financial instrument such as SBLC or BG.
Provider's bank has neither interest nor unsecured liability in such a transaction. The bank receives its fee for "cutting" (creating) the SBLC/BG and "delivering" it to the Receiver/Beneficiary's bank first digitally over the SWIFT Platform and subsequently a hard copy of the SBLC/BG via bank bonded courier. All liabilities that might arise from selling or leasing the SBLC/BG rests completely with the Provider since the financial instrument (SBLC/BG) was created at the Provider's instruction alone and also since it is secured against Provider's cash/ liquid assets held by the bank. Provider's bank that creates and delivers the SBLC/BG is called the Issuing Bank.
SBLC/BG Providers are a rare breed and are extremely difficult to find. Providers do not advertise themselves or send emails soliciting business from clients. As mentioned earlier, they are high net-worth corporations or individuals or funds and they hold a commanding position in the financial sector. Their businesses span across finance, banking, capital markets, oil & gas, commodities trading, manufacturing, IT, etc. More often than not, dealing in Financial Instruments is only a small portion of their business interests.
Providers of SBLC/BG generally work through their brokers or mandates who further engage sub-brokers in the chain making direct access to Providers even more difficult. It is absolutely futile to look for SBLC/BG Providers over the Internet. For those who work in the Financial Services sector and interact closely with high net worth individuals, private equities, funds, asset managers, banks, etc. on a regular basis, the chances of coming across a genuine SBLC/BG Provider is much higher than those who are outside the Financial Services sector.
Subcontracts International provides project owners / sponsors / promoters a much needed project financing gateway to investors and financiers. Our project financing services are particularly beneficial to shovel ready or green shoot projects. We have the means as well as the necessary expertise to approach numerous Banks, Investment Bankers, Non Banking Finance Companies (NBFCs), Financial Institutions (FIs), Venture Capitalists (VCs), Private Equity Investors (PE), Ultra High Net Worth Individuals (UHNWIs), Family Businesses, Hedge Funds, Pension Funds, Underwriters, etc. with great speed...