1) What is SBLC?
SBLC is a financial instrument promising to pay the beneficiary the amount mentioned therein upon maturity of the instrument. It is taken as collateral security or margin money for the finance assistance granted. SBLC is a rarely used and traded instrument in the international market. Thus easy for arranging line of credit or arranging fund for Finance assistance. Moreover our SBLC providers earns interest on the fund deposited with the Bank for the purpose of arranging the instrument.
2) What are the requirements for applying?
The requirements do of course vary between Providers. Bridge Funding will locate a suitable Provider to offer the best and most competitive facility that meets your needs. However, you would be expected to be trading solvently or if the applicant company is a new start, the company does not hold existing debt. The minimum amount is $/€ 10 Million.
3) What are the procedures for obtaining SBLC under Collateral Transfer?
Procedures are remarkably simple. Although they vary slightly from one Provider to the next, they are in general pretty similar. We have outlined the procedures in full detail to give our potential clients all the information they need.
4) Can I raise credit lines against the SBLC received?
Yes. This is generally a question for your own bank; however Bridge Funding can help you obtain credit once the Guarantee is received.
5) How long will it take to complete a deal and receive the SBLC?
Again, this varies from deal to deal. We do advise all our clients to allow a period of between 1 and 2 weeks from initial application. However, if we receive full co-operation and the flow of required information is smooth, it may be possible to complete the entire transaction from start to finish inside 15 days. Time is of course required for the Provider to lodge the necessary assets to the issuing bank of the SBLC, so we advise our clients that a minimum time of at least 21 days will apply in any event.
6) Once I receive a Term Sheet, am I secured the facility?
Obviously, Yes. Once the facility is secured, rest of the process will be completed within 10 banking days to get funds into your account.
7) What is the underwriting criterion to qualify?
These are also simple and straight-forward. Since the facility involves ‘importing’ a Guarantee on effectively a ‘lease’ platform, underwriting is quick and simple. The applicant will need to demonstrate that they intend to use the Guarantee for bona fide commercial purposes. This is usually done by standard due diligence and AML verification by our compliance team. They will also be required to confirm that they will release any encumbrance over the Guarantee 15 days prior to its expiry to allow the Guarantee to lapse without call or recourse to the Provider. Most of this information is obtained through due diligence verifications and will be based on the information provided by the applicant.
8) Nobody likes paying upfront fees. Do I need to pay any advance fees before Agreement?
No. Neither Bridge Funding nor any of its Providers' levy advance fees or charges. We provide our clients with a full and detailed Term Sheet fixing the exact binding terms of contract free of charge and without any obligation on the applicant to proceed. We burden all due diligence and underwriting costs. The Term Sheet is a formal offering of the facility and details all elements of the transaction including the amount, the term, details of the Provider, the issuing bank, the Contract Fee (the annual rental of the Guarantee) and the procedures to completion. It is a formal and binding offer.
9) There are any hidden or unexpected costs or charges?
No. All costs, fees and charges are detailed in full and explicitly within the Term Sheet contract supplied. If at any time after receiving the Term Sheet you decide you do not wish to proceed, you can do so with no financial commitment, cost or charge. All details, costs, charges and procedures will be declared before you are required to make any financial commitment.
10) How quickly can I know if I am accepted?
Generally, we can inform you within 48 hours of receipt of the initial application of your acceptance. Bridge Funding assures you have the best chance of being accepted by our selective panel of Providers and Private Equity companies.
11) What costs and charges do I need to pay once I have been given the facility?
If you wish to proceed with the facility once you have received the detailed Term Sheet contract offering you the facility, you will be required to make payment of all the collateral costs. You will receive a Collateral Offer contract directly from our company, generally within ten days. Depending on your credit status and trading history, the Provider may request that a deposit is paid against the Contract Fee.
12) What is a Issuance Fee and why do I need to pay it?
The Issuance Fee is a fee payable to reserve and purcahse the SBLC and is the consideration for the Term Sheet contract.
13) When could the first payment will be started after arranging of the SBLC?
First installment of payment can be started within 30 banking days of submission of operative SBLC in our Bank. The rest payment will be as per project implementation schedule.
14) As a Contractor what are the security to us for arranging SBLC on Promoters/Owners’ behalf?
Besides Bank’s Commitment to return the SBLC unencumbered, Property/Shares to be pledged in favour of our Company.
15) How long after receiving the SBLC can we receive credit funds against it ?
Typically you should expect to have loan funds credited to your account by the lending bank within a 5 banking days period. The lending bank will be advised of the issue of the SBLC by the Provider and the issuing bank via inter-bank SWIFT in advance and should therefore be expecting it. This helps cut the time taken by the lending bank to credit the loan funds upon receipt of the SBLC to the Beneficiaries account.
16) Is the SBLC received cash-backed ?
Cash backed” Cash Backed is a misnomer. Any SBLC, regardless of what security the issuing bank has taken for its issue, is demandable and callable by the beneficiary. It makes no difference whether the underlying asset is cash, gold, stocks or any other type of security.
17) Are the SBLCs designed or worded so I can borrow against it?
Yes. Most SBLCs are issued under collateral transfer facilities are worded in the correct way to allow the Beneficiary to use them as credit security. They are issued in accordance with ICC758 and are worded as a ‘Credit Facilities Guarantee’.
18) Will my bank offer me credit against the SBLC once it is received on my account ?
Under normal circumstances, Yes. The bank would be keen to make loans and grant credit facilities upon SBLCs as it forms a perfect, instantly liquidable and callable security for the lending bank. It is of course advisable to check with your bank first before applying.
19) If my bank refuses to offer me a credit facility against the SBLC, can Bridge Funding arrange one on my behalf?
Of course, we would be pleased to arrange a facility for you. Bridge Funding hold strong relationships with dynamic international banks keen to expand their lending opportunities on securities such as these. It is important to note that although we would be pleased to arrange an indicative commitment from a lending bank in advance, it is not possible to obtain credit against the SBLC until it is received to the Beneficiaries account.
20) What is the typical interest rate the lending bank will charge me for loans secured against the Corporate Guarantee?
Of course this will largely depend on the jurisdiction (country) the loan is taken. Generally inside Europe, international banks will levy interest charges around 02.00% per annum, or expressed in a 12 month LIBOR or EURIBOR rate + 01.00%. It is also important to note that the interest charges for credit raised against the SBLC will be in addition to the Contract Fee (rental fee) of the guarantee.
21) Is Collateral Transfer the same as ‘leasing’ a bank guarantee ?
Yes. The phrase ‘Collateral Transfer’ is used as it is the correct terminology.
22) Once issued, can the SBLC be cancelled prematurely ?
No. The SBLC issued will be fixed for the term agreed. SBLCs with terms longer than 12 months may be issued on renewable annual terms, depending on the Provider and the status of the applicant
23) What are the minimum and maximum amounts I can apply for ?
Currently, we have Providers that will issue collateral transfer facilities from a minimum of €/$ 10 million to a maximum of €/$ 500 million per contract.
24) What happens if I need Instrument more than €500 million ?
It is possible to apply for multiple contracts allowing more than €500 million. However, it should be noted that for amounts of €500 million and upward most Providers will only consider for investment and trade programme purposes. Multiple contracts are applied simultaneously and are often structures to be effected sequentially.
25) What is the minimum and maximum term ?
Generally, most Providers will issue these types of facilities from as short as 3 months to as long as 60 months (5 years). Most collateral transfer facilities are granted on a 12 month renewable contract. Contracts may be renewed year on year up to 5 years or longer. Longer terms may be negotiated for larger projects where multiple contracts are issued.
26) Does the Contract Fee get lower the longer the term?
Yes, naturally. As most contracts are based on a 12 month renewable term, the pricing is relatively stable. However, for shorter terms of 3 to 6 months, it is often more economical to apply for a 12 month contract as the pricing and costs are relatively similar.