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What is an SBLC?

A Standby Letter of Credit (SBLC) is a financial instrument issued by a bank on behalf of a client, guaranteeing payment to a beneficiary if the client fails to fulfill their contractual obligations.

Essentially, it’s a “payment of last resort,” used to back a client’s promise to pay or perform services. This form of credit assurance is frequently employed in international trade, project financing, and high-value business transactions to instill confidence among parties involved.

Key Points of an SBLC:

Credit Assurance: The SBLC acts as a safety net, protecting the beneficiary (often a supplier or service provider) by ensuring that they receive payment if the client (the applicant) defaults.

Common Uses: SBLCs are widely used in industries like construction, commodities, and international trade to guarantee project completion or payment in transactions.

Functionality: The SBLC is not meant to be a replacement for cash payment but serves as a guarantee that payment will be made if necessary.

For instance, in the event a business can’t meet its obligations, the SBLC enables the beneficiary to draw funds from the issuing bank.

Types of SBLCs:

Performance SBLC: Ensures that the client meets specific performance criteria, such as completing a construction project on time.

Financial SBLC: Guarantees payment to the beneficiary if the client defaults, typically used in sales and trade deals.

Advance-Payment SBLC: Covers advances given by the buyer to the supplier.

SBLC Process: To issue an SBLC, the bank assesses the client’s creditworthiness and may require collateral or cash security. Once approved, the SBLC is sent to the beneficiary’s bank through the SWIFT MT760 message, and in case of default, the beneficiary can request payment.

Leasing or Purchasing: SBLCs can be either purchased (owned) or leased, depending on the client’s financial needs and transaction requirements. Leasing allows temporary use of the instrument for a specific term, whereas ownership gives the client full rights to the instrument.

An SBLC assures business partners that contractual obligations will be fulfilled, reinforcing trust and encouraging smooth, secure transactions.

About Leasing BG/SBLC:

1. Verbiage: ICC 600, URDG 758 or the latest format
2. Delivery: MT799, 760, & Hard Copy
3. Fee Payment: 4% + 2%
4. Payment of transmission fee within 3 days after signing DOA.
5. Payment of Leasing Fee: Within 21 days after receiving BG/SBLC
6. Payment of brokers commission: Same day BG/SBLC is issued to the customer. And this applies only in deals that are introduced by a broker.

BG/SBLC Procedures:

1. Deed of Agreement (DOA) signing by both parties
2. Lessor issue invoice & Notarized “Corporate Refund Recourse Undertaking” for Lessee to pay bank transmission fee
3. Lessee will send “Bank transmission charges” (* Within 3 days after receiving invoice)
4. Lessor delivers “MT799/760 & Hardcopy”
5. Lessee pays broker commission (2%) same day BG/SBLC is issued and the “Leasing Fee (Within 21 days)

Description of The Bank Instrument:

1. Financial Instrument Type:                Fully Cash Backed Bank Guarantee {BG} / StandBy Letter of Credit {SBLC} 

2. Total Face Value:       Eur/USD 1Million (Min) to Eur/USD 50 Billion (Max)

3. Issuing Bank:            HSBC London/Hong Kong, Barclays Bank London, Citibank New York, Deutsche Bank Germany or any AAA Rated Bank.

4. Age:                         One Year and  One Day (with rolls and extensions where applicable) 

5. Leasing Price:           4% of Face Value plus 2% brokers commission (Applicable only if there are brokers in the transaction)

6. Delivery:                    SWIFT MT-760

7. Payment:                  MT103  Wire Transfer

8. Hard Copy:                Bonded Courier within 7 banking days.

9. Bank Transmission Fee: This depends on the face value of the BG/SBLC.

Financial Instrument Provider (Leased BG / SBLC Providers)

We provide financial instruments and trade finance services. The financial instruments we provide include BG Bank Guarantees, SBLC Standby Letters of Credit, Deferred Letters of Credit, Usance LC, Bank Comfort Letters,  etc.

Bank Guarantee BG

Bank Guarantees (BG)  provides a targeted method for securing performance and payment. The bank guarantee is used in both local and international transactions in the import and export business.

Bank Instrument (BG/SBLC) Monetization

Bank Instrument (BG/SBLC) Monetization is the process of liquidating or converting bank instruments (BG/SBLC)  into cash or legal tender.

General Credit Finance and Development Limited (GCFDL) are bank instrument monetizer. We can arrange and assist clients in discounting or monetize bank instruments, especially sblc or bg, or arrange a Non-Recourse loan against a Standby Letter of Credit (SBLC) issued from prime banks. The Standby Letter of Credit Monetization arrangement issues Non Recourse funds to the Client shortly after the Standby Letter of Credit (SBLC) is delivered to the Monetizer.

Our SBLC monetization rate is 80% LTV which is the highest in the industry, and above all, all our sblc are issued by either HSBC, Credit Suisse or Barclays Bank.

Standard Monetization Terms For BG / SBLC.

• BG and SBLC to be monetized must be issued by top 20 AAA rated banks such as HSBC, Citi, barclays, Stanchart etc.
• BG and SBLC from unrated banks cannot be monetized.
• Instruments with a Value OVER 5 Million Dollars
• BG & SBLC MUST have at least 11 months validity before expiry
• We prefer monetization transactions of $10 million or more, but we will accept transactions as low as $5 million transaction amount
• Transaction turnaround time between 10 to 14 working days or less
• Exceptions can be made to minimum transaction
• Brokers and intermediaries must have a legally binding agreement

BG / SBLC Monetization Process using the swift system. 

1. After execution of the BG / SBLC Monetization contract by both parties, the Client will instruct his bank to send SWIFT MT799 to the bank coordinates provided by the Monetizer.
2. The Monetizers bank on receipt of the SWIFT MT799 from the client’s bank will reply with a SWIFT MT799.
3. On receipt of the Monetizers bank SWIFT MT799 the client’s bank will deliver the Bank Guarantee (BG) / Standby Letter of Credit (SBLC) by SWIFT MT760 to the Monetizers bank.
4. Upon receipt, confirmation and delivery of the SWIFT MT760 the Bank Guarantee (BG) / Standby Letter of Credit (SBLC) Monetizer will within a maximum four (4) banking days grant a Non Recourse Loan for the LTV as agreed from its nominated bank to the Client.
5. The BG/SBLC Monetizer agrees to return the Bank Guarantee (BG) /SBLC unencumbered fifteen (15) calendar days before the 1st anniversary of the signed contract between the parties.

BG / SBLC Monetization Process using  Euroclear:

1. After execution of the BG/SBLC Monetization contract by both parties, the Client will instruct his bank to assign the BG/SBLC using FREE Euroclear Delivery to the bank coordinates provided by the BG/SBLC Monetizer.
2. The Clients Banker shall immediately email a certified Euroclear execution receipt of the Bank Guarantee (BG) Standby Letter of Credit (SBLC) delivery to the Bank Guarantee Monetizer.
3. Upon receipt and confirmation of the Euroclear assignment and delivery, the Bank Guarantee /Standby Letter of Credit (SBLC) Monetizer will within maximum three (3) banking days grant a Non Recourse Loan for the LTV as agreed by its nominated bank to the Client.
4. The BG/SBLC Monetizer agrees to return the Bank Guarantee (BG) / Standby Letter of Credit (SBLC) unencumbered fifteen (15) calendar days before the 1st anniversary of the signed contract between the parties.

Estimated Completion Time For SBLC Monetization:

The SBLC Monetization process typically takes between 7 to 10 Days after all documents are signed and verified or 3 to 4 Days After Instrument Delivery on the SWIFT or Euroclear Networks.

MT-760

MT 760 belongs to a category of SWIFT Message a type of inter-bank message used on SWIFT system to enable financial institutions can correspond. You can read the Difference Between Swift MT799 And Swift MT760 on this post:

Ready Willing and Able Letter (RWA)

RWA is a letter issued by a bank or financial institution on behalf of their clients. It demonstrates the intent and capability.

We have been providing these bank financial instruments to our numerous customers all over the world including importers, exporters as well as business owners that need credit enhancements or trade finance facilities to execute projects locally / internationally.

Looking to secure a loan with the added assurance of a Standby Letter of Credit (SBLC) or a Bank Guarantee (BG)? Discover how BGSBLC can elevate your financial credibility and open doors to new funding opportunities. 

Contact us today to learn more about our SBLC and BG options, and see how they can be tailored to meet your financing needs. Don’t wait—take a step towards financial security and growth now!

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