If you are looking to obtain an SBLC either through purchase or lease, you have arrived at your final destination. We are experts at handling issuance of SBLC and we have done it many times over. Investment Bankers, Project Owners, Oil & Gas Traders, Commodity Traders, etc. have successfully obtained SBLCs through us. If you follow our procedure, you can obtain an SBLC provided you are financially capable to transact. We do not entertain brokers or intermediaries. The clients need to engage us as their sole SBLC FACILITATOR for obtaining SBLC through us. Before proceeding, we strongly recommend one reads through the information below:
WHAT IS AN SBLC ?
A standby letter of credit (SBLC) 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 a SBLC is not intended for use, 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 a company. In case of default, investors are assured they will be paid principal and interest from the bank through which the SBLC 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, their main difference is that unlike DLC’s, they only become operative in case the applicant defaults, then 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 guarantees.
SBLC’s are very similar to demand guarantees, which also require that the presentation of stipulated documents be compliant with the terms and conditions of the guarantee. SBLC’s and 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 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.
HOW DOES IT WORK?
A breakdown of SBLC types is provided below:
1. 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.
2. An advance-payment standby – supports an obligation to account for an advance payment made by the supplier to the buyer.
3. A bid-bond or tender-bond standby – backs an obligation of the buyer to execute a contract if the buyer is awarded a bid.
4. A counter standby – backs the issuance of another, separate standby letter of credit or other undertaking by the supplier of the counter standby.
5. A financial standby – supports an obligation to pay funds, including any instrument evidencing an obligation to repay borrowed money.
6. An insurance standby – supports an insurance obligation of the applicant.
7. A commercial standby – backs the commitment of a buyer to pay for goods or services in the event of non-payment by other methods.
8. 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.
BUYING A BG/SBLC
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.
Our Purchased Bank Guarantees – Owned, are issued by World's Top 25 Banks. We use the Bank SWIFT Network to have clients' Owned Bank Guarantees (BG) delivered Bank to Bank using SWIFT MT799 followed by SWIFT MT760. We operate a reliable, efficient delivery and authentication process.
BANK INSTRUMENT PARTICULARS
Instruments: BG/SBLC, ICC 758/600 FORMAT, CASH BACKED, ICC600.758 BG
Age: Fresh Cut
Interest Rate: Zero Coupon
Term: One (1) years and One (1) day
Currency: United States Dollars (US$)/ Euro
Issuing Bank: Top 25 rated Europen Banks
Contract Amount: US$ XXX,000,000.00 (XXX Million United States Dollars/Euro)
Invoice Price: XXXXXX Percent (XX%) of Face Value payable by Buyer
Intermediary Fees: Two Percent (2%) of Face Value payable by Buyer
First Tranche: US$/Euro XX,000,000.00 (XXXX Million United States Dollars/Euro)
Subsequent tranches: As per agreed tranche schedule
Delivery: Buyer’s Bank sends SWIFT MT799 BPU
Issuing Bank sends PRE-ADVICE SWIFT MT-799
Issuing Bank sends instrument via SWIFT MT-760.
Hard copy of Instrument will be delivered to Buyer’s Bank via Bank Bonded courier within 7 banking days after receipt and authentication of payment.
Payment: Within 5 banking days after receipt and authentication of SWIFT MT-760, Buyer’s Bank will release payment to Seller’s Bank via SWIFT MT-103 in accordance with terms and conditions in Buyer’s SWIFT MT799 BPU.
1- PARTY B SUBMITS TO PARTY A THIS SIGNED AGREEMENT, TOGETHER WITH PROOF OF FUNDS AND AUTHORIZATION TO VERIFY, CLIENT INFORMATION SHEET, CORPORATE BOARD RESOLUTION, NON-SOLICITATION LETTER, SIGNATORY'S PASSPORT COPY, FULL TRANSACTION BANKING ACCOUNT AND CORPORATE REGISTRATION.
2- AFTER COMPLETION OF SATISFACTORY DUE DILIGENCE, PARTY A COUNTERSIGNS THIS AGREEMENT, WITH FULL BANKING CO-ORDINATES, CLIENT’S INFORMATION SHEET AND SIGNATORY’S PASSPORT COPY AND CERTIFICATE OF INCORPORATION AND IT THUS BECOMES A FULL RECOURSE COMMERCIAL CONTRACT AND RETURNS IT TO PARTY B, BOTH PARTIES SHALL LODGE RELEVANT AGREEMENT WITH THEIR RESPECTIVE BANKS.
3- PARTY B‘S BANK SENDS SWIFT MT799 BPU (DRAFT TEXT AS APPENDIX-A) CONFIRMING RELEASE PAYMENT ACCORDANCE SBLC/BG CAPACITY OF TWO HUNDRED FIFTY MILLION EUROS AND READINESS TO TRANSACT WITH IMMEDIATE EFFECT ON RECEIPT OF SWIFT PRE-ADVICE MT799.
4- UPON RECEIPT, VERIFICATION AND AUTHENTICATION OF PARTY B’S MT799 BPU, PARTY A‘S BANK SENDS SWIFT MT799 PRE-ADVICE (DRAFT TEXT AS APPENDIX-B) CONFIRMING READINESS TO TRANSACT WITH IMMEDIATE EFFECT ON RECEIPT OF MT799 BPU FROM PARTY B‘S BANK.
5- PARTY B‘S BANK CONFIRMING RECEIVE AND VALIDATE THE PRE-ADVICE MT799 SENDS SWIFT MT799 RWA REDINESS RECEIVE THE SBLC/BG VIA SWIFT MT760 FROM PARTY A‘S BANK.
6- UPON RECEIPT, VERIFICATION AND AUTHENTICATION OF PARTY B’S MT799 RWA, (DRAFT TEXT AS APPENDIX-C) PARTY A’s ISSUING BANK SHALL THEN ISSUE AND SEND THE SBLC/BG VIA SWIFT MT760 TO PARTY B’s BANK (DRAFT TEXT AS APPENDIX-D).
7- UPON RECEIPT, VERIFICATION AND AUTHENTICATION OF ABOVE MT760 SBLC/BG, PARTY B’S BANK SHALL RELEASE FULL PAYMENT EACH TRANCHE TO PARTY A VIA UNCONDITIONAL MT103 WITHIN FIVE (5) BANKING DAYS.
8- WITHIN SEVEN (7) BANKING DAYS UPON RECEIPT OF AGREED PAYMENT BY PARTY B, PARTY A’S ISSUING BANK SHALL DELIVER THE SBLC/BG HARD COPY ORIGINAL TO PARTY A’S DESIGNATED RECEIVING ACCOUNT BY BANK BONDED COURIER.
9- ALL SUBSEQUENT TRANCHES WILL BE BASED ON THE SAME PROCEDURES OR AS AGREED BY BOTH PARTIES, UNTIL COLLATERAL OR CREDIT LINE ARE EXHAUSTED.
10- ANY UNAUTHORIZED BANK CALLS, PROBES OR COMMUNICATIONS, OR AN IMPROPER SOLICITATION OR DISCLOSURE INVOLVING ANY OF THE BANKS CONCERNED IN THIS TRANSACTION WILL RESULT IMMEDIATE CANCELLATION OF THIS TRANSACTION AND SUBJECT THE VIOLATING PARTY TO DAMAGES.
Should Buyer default to pay the fees to the Seller and the Intermediaries fees as agreed on this contract within the allowed number of days on authentication of SWIFT MT-760, the Seller shall instruct the BG Issuing Bank to put a claim on the BG thereby forcing the Buyer's Bank to return the BG SWIFT MT-760 to the issuing Bank.
SANCTIONS FOR NON-PERFORMANCE
After this contract is signed by both Seller and Buyer, and copies exchanged electronically or otherwise by a delivery service, failure to follow the closing procedure in time and form herein is considered breach of this contract and puts the failing party in default position to pay a onetime penalty fee of 1% of the first tranche of the contract to the suffering Party.
Oil & gas traders can approach us with their requirements of trade financing and our expert team will gladly extend this service. Our procedure is simple yet transparent and our cost is extremely competitive. Traders can depend on our expert team to provide the most professional financial services.