SBLC stands for Standby Letter of Credit and is completely different from a Line of Credit or a Documentary Letter of Credit. An SBLC’s use and function is similar to a Bank Guarantee (BG). Due to regulations, US financial institutions are not able to offer many or any BG services so changing the legal wording of Letter of Credit became a crafty way to get around the laws. Consequently Standby Letters of Credit began to be issued as a sort of legal loop hole that continues to be used today. The code for an SBLC is SWIFT MT760.
SBLC’s, as well as BG’s, especially those sent via SWIFT MT-760, can be used to enhance credit profile when applying for financing with a bank or other financial institution. Depending on the wording and situation, SLBC’s can sometime be used as collateral for project finance. Harvest Finance can help you acquire an SBLC that is cash-backed making it more suitable to be used as collateral.
Our SBLC’s can be issued from a variety of jurisdictions, with Europe or South America being the most popular. SBLC’s are generated by an investor blocking their funds on your behalf. It is because of this that the term “leased” is used in reference to the fact that money is not yours. The SBLC can however, list you, your company, or your bank as the beneficiary. The Standby Letter of Credit then can be delivered via SWIFT MT-760.
Standby letters of credits (SBLC’s or SWIFT MT-760) most commonly are issued with terms of 1 year or 1 year and 1 day, but can be extended for terms up to 5 years. This is normally done with a 1 year extension with multiple opportunities to extend. Shorter termed SBLC’s also exist in terms of 90 days or 6 months as well. Normally the SBLC is transferred to the receiving party via the SWIFT protocol MT-760.
Financing a project by using an SBLC can be very expensive. You will need to pay the issuing party of the SBLC plus commission to the consultant that is facilitating the transaction. Once you have paid for the services. you can present the SBLC to the bank that is providing financing against the SBLC. Normally you will already have a loan, line or MoU with the bank and they will also charge you a fee for the loan or line. There may be monetization fees, or draws fees depending on your arrangement but rest assured your bank will being getting paid as well.
To successfully acquire an SBLC you need to take several factors into considerations. First clients should have a legitimate project and a bank or other financier ready to fund the project. Funding will most likely be contingent on the acquisition of an SBLC. You will also be required to have the money to pay for the SWIFT MT 760, Standby Letter of Credit, or Bank Guarantee up front. Clients MUST have a realistic and achievable exit strategy that entails how they will repay the loan in addition to how and when the SBLC will be returned.
This is the most common use of an SBLC. Over time they have also come to be used for other purposes such as Private Placement programs. We can help you acquire your SBLC for those purposes however the trade and platform is up to the client.
If this is your intent, understand that you will need to pay the leasing fees prior to an SBLC being issued. To be more clear, our SBLC providers will NOT allow their instruments to be put into trade until you have paid the leasing fee in advance. You cannot pay for the instrument at a later time with your anticipated profits or gains from your trade platform.