THESE ARE SOME BG/SBLC FACTS YOU SHOULD KNOW:
- Whether purchased or 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.
- Banks will issue an SBLC/BG to any of its customers if they have sufficient 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 is the “Primary Market” transaction.
- Providers of SBLC/BG 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 Providers would often be a collateral management firm, a hedge fund, or private equity company. BG/ SBLC Provider instructs its issuing bank to secure and encumber cash in his own account and authorizes the bank to “cut” (an industry terms meaning to create a financial instrument such as SBLC/BG). Effectively, the SBLC/BG is “leased” or “sold” to the Beneficiary as a form of investment since the Provider receives a return on his commitment.
- SBLC/BG is issued under ICC/URDG758 (UPC 600) protocol and is readily accepted by almost all International as well as Private Banks.
- SBLC/BG is supplied by the Issuing Bank of the Provider to the Beneficiary’s bank account at the Receiving Bank and is transmitted inter-bank via the appropriate SWIFT platform alone (MT-760).
- The Provider and the Beneficiary agree to enter into a Collateral Transfer Agreement (CTA) which governs the issuance of the SBLC/BG. The SBLC/BG is specifically issued to the Beneficiary for a defined purpose and each contract is bespoke. It is effectively a form of “Securities Lending” and often a derivative of “re-hypothecation”. The fact that there is an underlying agreement (the CTA) has no bearing on the wording or construction of the Guarantee (SBLC/BG). This allows the Beneficiary to use the SBLC/BG to raise credit, to guarantee credit lines and loans or to enter trade positions or buy/sell contracts.
- SBLC/BG is valuable in the secondary and tertiary markets, and this also creates an environment for Intermediaries to profit on the leasing and selling of SBLC/BG. Unfortunately, this also creates misunderstandings and opportunities for fraud. Scammers keep trying, by imposing their “procedures” which in general, involve rushed deals with no hard copies to follow, advanced payments, and so on.
- By its own nature and definition, only banks can legally issue SBLC (Stand-By Letters of Credit) or BG (Bank Guarantee). This is not only common sense, but actually regulated by banking laws in most countries since these are debt obligations issued by banks.
- SBLC/BG must be UCP-600 compliant and hence it must be issued by a licensed bank alone. Otherwise, it will not be UCP-600 compliant, regardless of the wording of the document. If it is not UCP-600 compliant, no bank will ever accept it as collateral or even as a documentary credit. While it is true that URDG-758 changed this from banks to “a bank, other institution or person” may act as a guarantor, the fact is that URDG-758 rules implied that financial stability of the guarantor is obligatory, and that the issuance of said documents shall be governed by the internal legislation of each country. Regardless, most banks will only accept documentary credit from other banks, due to their financial stability and their full compliance with local laws.
- 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.
- There are private Monetizers who would monetize a “leased” SBLC/BG. Some Monetizers will, however, only accept SBLC/BG with CUSIP or ISIN Numbers. This means they will NOT accept a fresh cut bank guarantee, ONLY seasoned instruments. Seasoned BG’s cost more and generally are only available to be purchased from secondary owners not banks.
- Although a leased SBLC/BG is not considered an “asset” (a leased SBLC/BG is not trading securities, trading debt instruments, or trading investment funds. There is no public market for the trading of SBLC/BG. All SBLC/BG transactions are private transactions), it can still be monetized, discounted or funded (whereby the SBLC/BG is turned into usable cash) by a resourceful Monetizer. Remember, SBLC/BG is after all a written obligation of the issuing bank to pay a sum on to a beneficiary on behalf of their customer in the event that the customer himself does not pay the beneficiary. The Instrument/ Security remains valid during the term before the Expiry Date. Such resourceful Monetizers possess the capacity to a draw a line of credit against “leased” SBLC/BG and use part of the cash to pay the client his “Non Recourse Monetization Payment” (often 40% to 65% of the value of the Leased Bank Instrument known as “Loan To Value” (LTV). The Monetizer then takes the balance of the money from the Line of Credit and places these funds into Trade / PPP using a proprietary trading platform. This platform is often a group of experienced bank traders who use the Monetizers cash and trade it generating significant profit returns on a weekly or monthly basis. Often the Platform uses normal trading risk protection strategies to ensure the Monetizers funds receive significant protection from all trading downside risk.
- Most people often confuse the term NOT RATED with the fact that some SBLC/BG issuing entities are not real banks, but private companies offering consulting services, and sometimes, issuing documents that are beyond their legal and financial capacity, hiding themselves behind the excuse that because they are an “offshore bank” or a foreign corporation or because they only deal with foreigners, they do not need to hold a banking license or comply with reserve deposits with the Central Banks of the jurisdictions from where they operate. The reality is, a rating is just an opinion given by one person or company, about the credibility of the bank or institution what the rating is about; but this has almost nothing to do with the truth, that the documents in question are worthless not because of the credit rating of the issuer, but because the issuer is not a bank.
- For political reasons, most Eurozone regulated banks avoid, as much as they can, to work with banks of certain countries. Trying to monetize an instrument issued by a Latin American country, or even China is almost impossible!! Even Europe is not free of that problem; for example, while the list of embargo banks from Russia and Ukraine is very small, most Eurozone regulated banks prefer to not accept as collateral instruments issued by any Russian or Ukraine based banks, they say it is to reduce their risks as much as possible, and to avoid working with banks that while not currently on the embargo list, can be included in said list at any time. Some other countries have strong, reliable and highly praised banks with excellent credit ratings, like Azerbaijan, yet almost no Eurozone regulated bank wants to work with instruments issued by them; this limits the ability of most monetizers to work with instruments from banks of these countries regardless of the credit rating of the bank.
- To determine if a borrower is worthy of an SBLC/BG, many banks will undertake a credit analysis. Credit analyses focus on the ability of the organization to meet its debt obligations, focusing on default risk. Lenders will generally work through the five C’s to determine credit risk: the applicant’s credit history, capacity to repay, its’ capital, the loan’s conditions, and associated collateral. This form of due diligence can revolve around liquidity and solvency ratios. Liquidity measures the ease with which an individual or company can meet its financial obligations with the current assets available to them, while solvency measures its ability to repay long-term debts. Specific liquidity ratios a credit analyst may use to determine short-term vitality are current ratio, quick ratio or acid test, and cash ratio. Solvency ratios might entail the interest coverage ratio.
Since we now know some BG/ SBLC facts, let us know what BG/SBLC is:
WHAT IS SBLC?
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.
A Bank Guarantee (BG) is the name used mostly in Europe and Standby Letter of Credit (SBLC) is exactly the same, but used in the USA. Since we are working globally you will see the expression BG/SBLC in our documents.
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 is no need to look any further. We are experts at handling issuance as well as monetizing of SBLC/BG and we have successfully done this many times over. Banks, Corporations, Airline Operators, Investment Bankers, Energy Companies, Project Owners, Miners, Oil & Gas upstream and downstream companies, Commodity Traders, etc. have used our services to successfully obtain SBLCs/BGs. Since purchasing or leasing SBLC/BG is a complicated process, you need to follow our procedure unconditionally to attain success provided you are financially capable to transact and possess the correct business credentials. You also must have a credible reason (e.g. a bankable project or an ongoing trade deal) to purchase/lease such financial instruments. We are supported by some very well established and wealthy corporations, Institutions, funds, and Ultra High Net Worth Individuals (UHNWI) around the globe who act as our Providers.
HOW DOES SBLC WORK?
- As a performance standby – backs a commitment to perform other than to pay money/funds and includes an obligation to pay for loses occurring from a default of the buyer in the process of completing an underlying transaction.
- As an advance-payment standby – supports an obligation to account for an advance payment made by the supplier to the buyer.
- As a bid-bond or tender-bond standby – backs an obligation of the buyer to execute a contract if the buyer is awarded a bid.
- As a counter standby – backs the issuance of another, separate standby letter of credit or other undertaking by the supplier of the counter standby.
- As a financial standby – supports an obligation to pay funds, including any instrument evidencing an obligation to repay borrowed money.
- As an insurance standby – supports an insurance obligation of the applicant.
- As a commercial standby – backs the commitment of a buyer to pay for goods or services in the event of non-payment by other methods.
- As a direct-pay standby – intended to be the primary method of payment. It may or may not be linked to a default in performance or payment.
As a growing trader, importer or exporter, a bank guarantee or letters of credit from Kingrise Finance Limited can help you to close more deals.
Kingrise Finance Limited are genuine sblc providers and sblc monetizers. All our purchased and leased BG/SBLCs are issued by World’s rated Top 25 Banks. We can arrange and issued bank instruments such as bg/sblc from any of the worlds biggest banks in French, Germany, London, Paris, New York, Spain, Italy, Malaysia, Indonesia, Turkey, Hong Kong, Singapore or USA. We can also monetize any bank instrument such as bg or sblc. The bg/sblc monetization arrangement issues non recourse funds to the customer shortly after the bg/sblc is delivered to the monetizer.
As reliable bg/sblc providers, we use the Bank SWIFT Network to have clients’ BG/ SBLC delivered Bank to Bank using SWIFT MT799 followed by SWIFT MT760. We operate an extremely reliable, efficient delivery and authentication process.
We welcome any enquiries or questions.We feel it is necessary for our clients to fully understand all elements of a facility before applying.