Standby Letter of Credit Meaning, Uses of SBLC & SBLC Process

29 Jun Standby Letter of Credit Meaning, Uses of SBLC & SBLC Process

Standby Letter of Credit (SBLC or SLOC)

A standby letter of credit (SBLC or SLOC) is a legal document that guarantees a bank’s commitment of payment to a seller in the event that the buyer–or the bank’s client–defaults on the agreement. Grand City Investment Limited is a Standby Letter of Credit provider, bg sblc provider, bank guarantee provider, Real SBLC Provider, bank instrument provider, Lease SBLC, SBLC Funding, SBLC Financing & BG SBLC Monetization, We are monetizers of bank instruments.

A standby letter of credit helps facilitate international trade between companies that don’t know each other and have different laws and regulations. Although the buyer is certain to receive the goods and the seller certain to receive payment, a Standby Letter of Credit (SBLC or SLOC) doesn’t guarantee that the buyer will be happy with the goods. A standby letter of credit can also be abbreviated SBLC Also, a standby letter of credit is different from a bank guarantee.

How a Standby Letter of Credit Works

A SLOC/SBLC is most often sought by a business to help it obtain a contract. The contract is a “standby” agreement because the bank will have to pay only in a worst-case scenario. Although an SBLC guarantees payment to a seller, the agreement must be followed exactly. For example, a delay in shipping or a misspelling a company’s name can lead to the bank refusing to make the payment.

What is the difference between SBLCs and LCs?

A Standby Letter of Credit is different from a Letter of Credit. An SBLC is paid when called on after conditions have not been fulfilled. However, a Letter of Credit is the guarantee of payment when certain specifications are met and documents received from the selling party.

Types of Standby Letters of Credit (SBLC/SLOC)

• Performance SLOC
  • Performance standby letters of credit ensure the non financial contractual obligations (quality of work, amount of work, time, cost, etc.) are performed in a timely and satisfactory manner. If these obligations are not met, the bank will pay the third party in full.

• Financial SLOC
  • Financial standby letters of credit ensure financial contractual obligations are fulfilled. Most SLOCs are financial.
  • Financial SLOCs are often required when performing international trade or other large purchase contracts under which other forms of payment protections (such as litigation in the event of non-payment) can be difficult to obtain.

Advantages of a Standby Letter of Credit (SBLC / SLOC)

The SLOC is often seen in contracts involving international trade, which tend to involve a large commitment of money and have added risks.

For the business that is presented with a SLOC, the greatest advantage is the potential ease of getting out of that worst-case scenario. If an agreement calls for payment within 30 days of delivery and the payment is not made, the seller can present the SLOC to the buyer’s bank for payment. Thus, the seller is guaranteed to be paid. Another advantage for the seller is that the SBLC reduces the risk of the production order being changed or canceled by the buyer.

An SBLC helps ensure that the buyer will receive the goods or service that’s outlined in the document. For example, if a contract calls for the construction of a building and the builder fails to deliver, the client presents the SLOC to the bank to be made whole. Another advantage when involved in global trade, a buyer has an increased certainty that the goods will be delivered from the seller.

Also, small businesses can have difficulty competing against bigger and better-known rivals. An SBLC can add credibility to its bid for a project and can often times help avoid an upfront payment to the seller.

Cost of SBLC

Grand City Investment Limited are lc, bg and sblc providers, our sblc leasing fee is 4% leasing fee per year. If the bg / sblc is needed for more than one year, there will be an option of rolls and extensions where applicable. If the terms of the contract are fulfilled early, the customer can cancel the BG/SLBC without incurring additional charges.

What is BG SBLC funding, SBLC Financing & BG/SBLC Monetization? 

SBLC financing or bank guarantee funding or bg sblc monetization is the process of converting a bg bank guarantee or sblc into a legal tender.

Grand City Investment Limited is a bg sblc monetizers. We can arrange bg / sblc for your import and export transactions, credit enhancement as well as in your trade finance transactions. We can also discount or monetize a bg or sblc @ 75% LTV.

DESCRIPTION OF BUY/PURCHASE BANK INSTRUMENT (BG/SBLC/SLOC)

1. Instrument:                BG (Bank Guarantee) Standby Letter of Credit (SBLC), cash-backed,
2. Total Face Value:          Eur/USD 2 Million (Min) to Eur/USD 500m (Max)
3. Issuing Bank:              HSBC Hong Kong, Barclays Bank London, Deutsch Bank AG, Frankfurt  or any AA Rated Bank.
4. Term / Age:                One (1) Year and One (1) day, Fresh Cut
5. Invoice Price:              45% Net and 47% Gross of the face value of each BG/SBLC to the Seller, including 2% consultancy fees as per IMFPA.

6. Consultation Fee:       In total of 2%, which is to be split and paid to the consultants as follows:

1% to …(Seller’s Mandate).., paid by the Seller/Payer-1

1% to ………………………, paid by the Buyer/Payer-2 7. Delivery of instrument:          Bank-To-Bank by SWIFT MT-760, as per the Schedule of Delivery of Buy-Sell Agreement

8. Payment for instruments:                   By SWIFT MT-103 wire transfer
9. Original Hard Copy:                 By bonded courier to Buyer’s designated Depository Bank within Seven (7) bank working days after receipt of BG/SBLC(s) settlement payment by SWIFT MT-103 into the Seller’s account.

BELOW IS THE DESCRIPTION OF LEASE BANK INSTRUMENTS (BG/SBLC/SLOC)

1. Instrument:               Fully Cash Backed Bank Guarantee {BG} or StandBy Letter of Credit {SBLC}
2. Total Face Value:       USD 2Million (Min) to USD 500m (Max)
3. Issuing Bank:             HSBC Hong Kong, Barclays Bank London or any prime Bank.
4. Age:                        One Year and  One Day (with rolls and extensions where applicable)
5. Leasing Price:            4%  (+ 2% brokers commission where applicable) 2% broker commission applies to clients that were introduced by brokers
6. Delivery:                   SWIFT MT-760
7. Payment:                  MT103  Wire Transfer
8. Hard Copy:                Bonded Courier within 7 banking days.9. Bank Transmission fee: Depends on the face value of the bank instrument

How to Obtain a Standby Letter of Credit

The standby letter of credit process is similar to that of obtaining a commercial loan, with a few key differences.

As with any business loan, you will need to provide proof of your creditworthiness to the bank. However, the SLOC approval process is much quicker, with letters often being issued within a week of all paperwork being submitted.