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What is SBLC leasing ?

It is a guarantee made by the bank on behalf of the client through a swift MT 760 message. SBLC leasing is the process of leasing SBLC to increase confidence and creditworthiness of companies The Issuing Bank or SBLC Provider issues SBLC on behalf of client to provide Guarantee (Provider is Third party Asset Management company)

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How much does SBLC Cost ?

A stand by letter of credit cost approximately 6% to 10% of SBLC Face Value for a period of 1 year.  In some cases SBLC providers price for 1 year SBLC can cost as much as 7.00% + USD 1000  SBLC Works as a safety mechanism for beneficiary

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How does it work?

Let's say A company needs a loan to finance a project but the bank is not convinced that the company has the creditworthiness OR financial stability to repay the loan. The Bank may require a company to provide SBLC as collateral which bank draw upon in the event that the loan is not repaid.  In this scenarios the bank issuing SBLC take risk of guaranteeing payment to the beneficiary.

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The beneficiary can relay SBLC as a Guarantee of payment and may likely to provide loan knowing that there is a back up source of funds in essence SBLC issued to increase the confidence and creditworthiness of company OR clients seeking out loans by giving the loan issuer peace of mind that the loan will be fully paid by SBLC provider.

 

How do you issue SBLC ?

The client has nothing to do with the issuance of SBLC it is a duty of issuing bank alone to issue SBLC on behalf of client.  The issuance of SBLC is done by bank or SBLC provider on behalf of the client.  

 

Can an SBLC be monetized ? 

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The short answer is YES, But, there are some questions you need to answer before moving forward.

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1) Are you in possession of the SBLC instrument ?

2) Do you have legal documents giving you control own the SBLC ?

3) Has the SBLC been fully paid for before requesting if you can monetize it ?

4) Is the SBLC unencumbured ?

5) What is the callable or verifiable?

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if you answer YES to all these questions, then your lease SBLC can be monetized either by selling it in its entirely or by taking out a non recourse loan

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How long does it take to monetize an SBLC ?

Monetizing an SBLC takes approximately 5 to 15 days

if it involves converting the instrument into MONEY, which can be done through a variety of financial instruments and procedures. 

The exact timeline can depend on various factors, such as the complexity of the transaction between the parties involved, and the compliance requirements that need to be met.  During the monetization process SBLC will be reviewed by monetize (R) who confirm its authenticity.

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Once the SBLC is verified the monetized will offer a Loan Amount based on Percentage of (%) of SBLC

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The client or owner of SBLC can choose either to sell SBLC out rate or takeout Non-Recourse loan against it.

 

 Its impotent to know before proceeding with SBLC monetization the owner of SBLC must have  legal control over the instrument it must be fully paid and it must be unencumbered and verifiable.

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The process of issuing SBLC involves following steps

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The client contact the bank or SBLC provider to request for SBLC - (Third party Instrument issued by Provider only)

The Bank reviews clients' creditworthiness and the terms and conditions of the contract between client and the beneficiary (This is pre qualification process where the KYC, corporate information, Exclusive agreement with applicable retainer fees to be paid UPFRONT

If the Bank or SBLC provider approves the request they will issue SBLC on behalf of client

The Bank will then send that swift Message typically MT760 to beneficiary confirming the Issuance of SBLC

The beneficiary will verify SBLC and confirm its authenticity with issuing bank or SBLC provider

ITs important to note the client does not issue SBLC themselves, but instead its issuing bank or SBLC provider who does on their behalf