STANDBY LETTERS OF CREDIT
ABOUT OUR STANBY LETTERS OF CREDIT
Standby Letter of Credit (SBLC / SLOC)?A standby letter of credit (SBLC/SLOC) is a guarantee of payment by a bank on behalf of their client. It is a loan of last resort in which the bank fulfills payment obligations by the end of the contract if their client cannot. A standby letter of credit can also be abbreviated SBLC or SLOC. A standby letter of credit is different from a bank guarantee. Bongyan Finance Limited Company Limited is a genuine sblc provider & leased bank instrument provider. We are a bank guarantee provider. Please be aware that a Standby Letter of Credit is different from a Bank Guarantee.
Types of Standby Letter of Credit (SBLC/SLOC)
Types of Standby Letter of Credit (SBLC/SLOC)
Financial standby LOC: An exporter sells goods to a foreign buyer, who promises to pay within 60 days. If the payment never arrives (and the exporter required the buyer to use a standby letter of credit) the exporter can collect payment from the importer’s bank. Before issuing the letter of credit, the bank typically evaluates the importer’s credit and determines that the importer will repay the bank. But if the customer’s credit is in question, banks may require collateral (or funds on deposit) for approval.
Performance standby LOC: A contractor agrees to complete a construction project within a certain time frame. When the deadline arrives, the project is not complete. With a standby letter of credit in place, the contractor’s customer can demand payment from the contractor’s bank. That payment functions as a penalty to encourage on-time completion, funding to bring in another contractor to take over mid-project, or compensation for the headaches of dealing with problems. This is an example of a “performance” standby letter of credit, and a failure to perform triggers the payment.
Advantages of a Standby Letter of Credit (SBLC / SLOC)
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.
The SBLC / 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/SBLC, 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.
Uses Of Standby Letters of Credit (SBLC / SLOC)
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 SLOC doesn’t guarantee the buyer will be happy with the goods. A standby letter of credit 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/sloc 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. There are two main types of standby letters of credit:A financial sblc/sloc guarantees payment for goods or services as specified by an agreement. An oil refining company, for example, might arrange for such a letter to reassure a seller of crude oil that it can pay for a huge delivery of crude oil. Standby letters of credit can help establish trust with your business partners and be a powerful tool to help meet your business goals.
What Is The Difference Between Letter of Credit (LC) and Standby Letter of Credit (SBLC)?
The Difference between LC and SBLCis as follows…
A letter of credit (LC), also known as a documentary credit or bankers commercial credit, or letter of undertaking (LoU), is a payment mechanism used in international trade to provide an economic guarantee from a creditworthy bank to an exporter of goods. Letters of credit are used extensively in the financing of international trade, where the reliability of contracting parties cannot be readily and easily determined. Its economic effect is to introduce a bank as an underwriter, where it assumes the counterparty risk of the buyer paying the seller for goods. The Standby Letter Of Credit (SBLC) is governed by a set of guidelines known as the Uniform Customs and Practice (UCP 600), which was first created in the 1930s by the International Chamber of Commerce (ICC).
So What Is The Key difference: The ‘Letter of Credit’ and the ‘Standby Letter of Credit’ are two legal bank documents that are used by international traders. Both these letters are used to ensure the financial safety between the supplier and their buyers. And, SBLC is a type of LC that is used when there is a contingent upon the performance of the buyer and this letter is available with the seller to prove the buyer’s non-performance during the sale.
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During a transaction, the buyer wants an assurance of receiving his product or merchandise on time, and the seller wants his security of being paid on time at the completion of the job. Here, a letter of credit is issued, for it is an assurance or a type of guarantee that the seller will receive his correct payments in time by the clients. The LC solves both the issues by bringing in the buyer’s and seller’s banks into the transaction.
The issuing bank of the buyer, then, opens a LC in the favor of the seller and states that seller will be paid and that he or she will not suffer any damages or losses because of the non-payment of the buyer. Though, the money transfer to the seller will only be initiated after all the conditions or documents of the contract are completed. However, the bank also safeguards the interest of the buyer by not paying the supplier until it receives a confirmation from the supplier that the goods have been shipped.
Based on this, there are two types of LCs being issued, they are:
Documentary Letter of Credit (DLC) and
Stand By Letter of Credit (SBLC)
Now, the DLC depends on the performance by the supplier, whereas SBLC depends on the non-performance or default on the part of the buyer.
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The purpose of this letter is to establish a bank guarantee for the deal or transaction with a third party. For example, if an individual wishes to take a loan, but does not have a sufficient credit standing, the bank may then ask for a guarantee from another party (third party), and this is done in the form of a standby letter of credit that is issued by another bank. However, the said individual would then have to produce certain documents or evidence to support the non-performance of the buyer to obtain the payment through the SBLC.
The bank is obligated to make payment if the documents presented comply with the terms of contract. Though, the SBLC are considered very versatile and can be used with modifications to suit the interests and requirements of the buyers and sellers.
CLICK HERE TO GET A STANDBY LETTER OF CREDIT (SBLC) FROM HSBC HONG KONG, BARCLAYS BANK LONDON, CHASE BANK OF AMERICA, STANDARD CHARTERED BANK, BANK OF AMERICA OR ANY PRIME BANK IN EUROPE OR USA.
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
At Bongyan Finance Limited, we offer a very simple and straightforward SBLC Monetization settlement method using the Swift Network System..We use the SWIFT Network to have the Standby Letter of Credit (SBLC) delivered Bank to Bank using SWIFT MT799 followed by SWIFT MT760.
What is the LTV (Loan To Value) of a Standby Letter of Credit (SBLC)? At Bongyan Finance Limited, we offer the best rates in the industry. All our standby letters of credit (SBLC) are issued from prime banks and our SBLC LTV is 80% which you cannot get elsewhere. So why go elsewhere?
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STANDBY LETTERS OF CREDIT
Stаndbу letters оf credit are оftеn uѕеd tо рrоvіdе security for аn оblіgаtіоn, ѕuсh аѕ a lease оr оthеr lоng-tеrm соntrасt. Landlords may rеԛuіrе a deposit or a standby letter оf credit thаt guаrаntееѕ payment frоm thе issuing bank іf a tenant fаllѕ іn аrrеаrѕ. Oftеn, lаrgе соntrасtѕ may rеԛuіrе аt least оnе оf thе раrtіеѕ tо hаvе a standby lеttеr of сrеdіt іn place fоr thе transaction tо mоvе fоrwаrd. Bаѕісаllу, a ѕtаndbу lеttеr of сrеdіt guarantees thе bеnеfісіаrу thаt it wіll bе paid frоm a creditworthy bаnk іf іt’ѕ unable tо gеt раіd bу its counterparty іn a transaction.
Exрrеѕѕ provides standby lеttеrѕ of сrеdіt, allowing transactions tо hарреn thаt otherwise mіght bе considered too rіѕkу bу thе rесеіvіng еntіtу.