Tuesday, 25 July 2017

Standby Letter Of Credit and How Does It Work


When you carry a business, you certainly know the risks and things can go wrong anytime. This is the reason why you always should have some back up plans and this is the reason a lot of people invest in ban instruments like the SBLC.

So what is SBLC?

SBLC is the guarantee that your bank provides you in writing, here they sate that if anything goes wrong with your transaction with the seller, then the bank will pay on behalf of you. Now, this is the easiest way we can make you understand the concept of SBLC or the Standby letter of credit. However, the most important thing you need to remember is that, SBLC, unlike the letter of credit, is not meant to be used. It is more like a damage control and a backup plan that can be used only if there is a “huge” problem; for instance, you’re filing for bankruptcy.

However, acquiring the SBLC actually has a lot of benefit for your trades both nationally and internationally. The security you get from the bank helps you gain the right kind of trusts from your traders and that is one of the biggest advantages of the SBLC financing.

There are two types of Standby letter of credits –

1.    The financial Standby letter of credit – When it comes to the financial SBLC, it is usually in terms of paying the money back to the seller. For instance, if you have bought something from a foreign seller or even from a local seller, and you promised them to pay the amount in 60 days but you never did, then the seller will collect the money from your bank(if you have SBLC). However, when you get an SBLC from your bank, it is just because you might have hold a good financial history in the past and your bank trusts you. Therefore, the bank will assume that you’ll pay them back.

2.    The performance Standby Letter of Credit – In case of performance SBLC, the example is pretty simple. For example, if you as a contractor has promised to complete a construction within a certain period of time and you have failed to do so, your customer can go ahead and collect the payment be it the penalty, advanced payment or any other sort of payment from your bank in the name of the performance SBLC.

There are a lot of benefits of having an SBLC. All you need to do is contact the bank.

Friday, 16 June 2017

What is SBLC and How to get an SBLC?


By definition, an SBLC is a document issued by your bank or any bank you have approached for the document which states or serves a guarantee where the bank promises to pay the “beneficiary” in case of any mishaps or if something fails to happen.

The SBLC, just like the LOC, can be used for both international and national trades and they have a lot of benefits to count on.

However, there are a lot of differences between SBLC and LOC and SBLC actually has nothing to do with the classical documentary Letter of Credit. The letter of credit provides security from the bank, which is presumably a disinterested third party. If the bank's customer fails to do something like if they cannot pay on time, complete a project on time, or satisfy certain terms of an agreement the bank – not the customer who failed to deliver – pays the beneficiary.

However, the SBLC is more like a safety net and people normally avoid using it. You only need to use the safety net when something goes terribly wrong. With a commercial letter of credit, on the other hand, everybody involved hopes and expects that payment will occur. However, SBLC funding is the best way to keep the safety net for the better future.

When it comes to the domestic transactions, the SBLC can be frequently used and these are actually quite unique because they can include a performance component or negative performance, if you prefer. If a service is not performed, the beneficiary gets paid.

So how to get a Standby Letter of Credit?

All you need to do is approach your bank and ask for one. Talk to someone in your bank’s commercial division or someone who is in the international trades department. But make sure you don’t make any hurry while making a decision and understand all the criteria properly and ask relevant questions before you make any decision.

These things are really complicated and they have a lot of terms and conditions to be fulfilled and that too cut to cut every time. Therefore, be sure to work closely with your bank and your attorneys to understand what you need to do to collect the payment – both the letters of credit are notoriously complex, and meeting all of the requirements is difficult. If you don’t meet all of the requirements exactly, you won’t get paid.

Monday, 22 May 2017

The Various Benefits of Derivatives


When we talk about derivatives, we mean an instrument whose value is derived from the value of one or more underlying, which can be commodities, precious metals, currency, bonds, stocks, stocks indices, etc.

The most common examples of derivative instruments are Forwards, Futures, Options and Swaps. So it means derivative instruments are those instruments that can be sold and you can gain profit out of it. However, there are quite a few benefits of selling financial instruments and it also has a few purposes.

So before we discuss about the benefits, let’s see how a derivative derives profits form. Here are a few ways derivatives can derive profits from –

1.    When there are changes in the equity markets and in the interests around the world.

2.    When the currency exchange rates shifts from one place to another.

3.    When there is a change in the global supply and demand for commodities such as agricultural products, precious and industrial metals, and energy products such as oil and natural gas.

As it has been already mentioned above, there are quite a few benefits of these derivatives. Here are they –

1.    The price discovery – Futures market prices depend on a continuous flow of information from around the world and require a high degree of transparency. A broad range of factors such as the climatic conditions, political situations, debt default, refugee displacement, land reclamation and environmental health, impact supply and demand of assets and especially in the commodities in particular. And thus the current and future prices of the underlying asset on which the derivative contract is based.

2.    The risk management – Derivative market is well known for its risk management capacity. So what does the risk management actually mean? This is actually a process where the level of risks are indentified and after that, there are measures taken through which the desired level of risks are indentified and then alter the former to equal the latter. This category actually falls under the category of hedging and speculation.

3.    Improving the market efficiency of for the particular asset – The financial instrument or the asset you are selling would be immensely efficient in the market and this is going to happen because it is the derivative. The derivatives improve the market efficiency as the investors will sell the richer asset and buy the cheaper one until prices reach equilibrium. In this context, derivatives create market efficiency.

Thursday, 4 May 2017

Financing Your SBLC


By definition, a SBLC (Stand by Letter of Credit) is a document issued by a bank, guaranteeing payment on behalf of a client. This is used as a “payment of last resort” if the client fails to fulfill a contractual commitment with a third party. In all reality, the SBLC is just a piece of paper with a “value” backed by the good credit of the bank, allowing clients use a “conditional collateral” if needed.

SBLC financing has been around the corner for over a few years now and SBLC funding isn’t a new concept. However, there is a vast difference between Standby Letter of Credit and the Letter of Credit.

There are varieties of ways through which an SBLC can be used. However, the funding of SBLC depends on your assets, cash, CD’S or net worth as it is just a credit enhancement.

These financing programs range from 100M and above. They range from immediate project financing to installment financing. In this tough economic market, this type of financing is being used to finish construction projects, provide charities and businesses with some extra cash, back private equity, obtain film financing, and provide municipalities a way to improve infrastructure. Any type of project financing can be done this way.

There are many finance companies and banks that provide you some of the best Standby letter of credit programs. Here are a few examples of some of the SBLC programs –

1.    Min 100M face value.

2.    Up to 200% project financing.

3.    Forgivable loans within 90 days or sooner.

4.    Up to 80% of the face value of the SBLC.

5.    Leased programs.

6.    Proof of Funds backed via bank to bank communication.

7.    Very competitive pricing.

The best way to finance your projects is through SBLC financing. This is the safest way for both you and your investors. It provides better flexibility and along with much better terms.

Some banks and finance companies even provide forgivable loans that are available for humanitarian projects or projects which has the ability of creating jobs.

We recommend you to get in touch with any of the best financing companies in your city who can provide you the best financing program available. Talk with your agent, know all the terms and conditions, talk about the risks and learn each and everything in and out before making any decisions. SBLC is definitely one of the best options.

Monday, 17 April 2017

What is Bank Instrument Monetization?


When we talk about bank instruments, we also talk about monetizing it and getting better returns on the specific investments. When you invest in any kind of bank instruments, those instruments improve your financial status and help your business grow to a good extent.

Before you go ahead and buy any of the bank instruments, you must make sure that you understand the terms and conditions of the same along with the benefits and how to do it.

Not everyone is well aware of what are bank instruments, what the benefits are and what these SBLC; BG providers actually do to help you monetize the instruments.

What is bank instrument monetization?

Monetizing Bank Instruments is the process of liquidating such instruments by converting them into legal tender. We can monetize or lend on just about any bank instrument to be used for project funding, move them into various trading platforms quickly and easily, as well as creatively incorporating them into financing certain development projects.

A lot of financial institutions and other bank and finance companies provide you various opportunities to monetize your instruments; such as – MTN's (Medium Term Notes), BG's (Bank Guarantees), LOC's (Letter of Credit), SBLC's (Standby Letter of Credit) etc.

What are the options available for monetizing your bank instrument?

There are a few options available for you when you need to monetize your bank instruments. They are –

1.    You can monetize the instruments for cash.

2.    You can also monetize the instrument for Trading Platform entry.

3.    Or the third option is when you can monetize your instrument for both Trading Platform entry and Cash.

What are the requirements for bank instruments monetization?

There are a few terms and conditions for monetizing your bank instruments. These terms and conditions may vary depending on different banks and financial organizations. However, the most common terms and conditions are –

1.    The bank instruments should be owned by you. You should have the ownership.

2.    Any bank instruments from all top banks and financial institutes are accepted.

3.    There are no up-front fees (in most banks).

4.    The financial instruments should be owned.

5.    It is fine if there are no big projects in hand.

6.    You as a client must be in full control of the bank instrument. And you have to be capable enough to deliver the instrument to the financial institution.

7.    The instruments must have a minimum face value as determined by the bank.

Thursday, 30 March 2017

How Does SBLC Work?


When you are doing a business or you are involved in any big investments, anything can go wrong with the finance and it is very important for you to have a backup plan. The Standby letter of credit is one of the best back up plan you can have for yourself. It can provide you protection whether you are purchasing a completed service or shipping physical goods.

SBLC is one basically a document that is issued by the bank and the letter saves you. You can get the guarantee from the bank saying they will be paying the beneficiary amount if anything goes wrong with your finances.

These can be used both in domestic trades as well as international trades. The SLBC helps you to pay the beneficiary amount when you are unable to make the payment on time, or complete the project on time, or you are unable to satisfy any of the terms and conditions of the agreement.

What are the types of the SBLC?

There are a lot of types of SBLC. These are –

1.    Performance Standby – This standby letter of credit provides an obligation to perform and not to pay the money on behalf. For instance, you are unable to complete the task, your bank will do the task on behalf of you rather than paying money in order to cover the losses.

2.    Advance Payment Standby – This SBLC supports an obligation to account for an advance payment made by the beneficiary to the applicant. This basically helps you as the bank already makes an advance payment on your behalf as SBLC letter of credit.

3.    Tender standby/Bid Bond – If the applicant is awarded a bid, this SBLC is obligated to execute a contract.

4.    Counter standby – This is another form of SBLC which favors the issue of another standby or a separate undertaking by the beneficiary of the counter standby.

5.    Direct Pay Standby – The SBLC is used to pay directly when to an obligation where the only possible condition of payment is or are the passage of the terms and conditions available on the contract.

6.    Insurance Standby – This standby basically is an insurance or a reinsurance obligation to the applicant.

7.    Commercial Standby – Commercial SBLC is one of the most used standbys as it supports the obligations of an applicant to pay for goods or services in the event of non-payment by a business debtor.

Friday, 3 March 2017

SBLC and How Does it Help You in International Trade

Any business or any person can find transactional havocs and issues and it is always wise to keep a backup plan. SBLC or Standby Letter of Credit is one of the best options you can use as a backup plan or that can provide you protection whether you are purchasing for a completed service or you are shipping any physical good.

What is SBLC?

Standby Letter of Credit is the key to protection; it is basically a letter issues by your bank which say it will pay a “beneficiary” in case you are unable to pay or something fails to happen. The bank pays the beneficiary for you if you fail to complete the project, pay on time or unable to stand up to a few terms and conditions. The standby Letter of Credit is the letter where the bank promises you the same.

Standby Letter of Credit is a great service to use as it can benefit you many ways. One of them is International Trade. However, it can also be proved beneficial in terms of domestic transactions.

How does it help you in International Trade?

As the bank is guarantying you to pay the beneficiary for you in terms of emergency, they make one thing the main purpose of their service and that is to boost you or your business’ creditworthiness.

When you are able to pay make the payments on time, then there is no way the letter of credits get drawn on. In the international market, the Standby Letter of Credit works as backup plan for you. When you are dealing in the international market, the buyers benefit from the goods and services they get in lower costs and the sellers benefit from the added demand. Here, Standby Letter of Credits plays the role of backup payment mechanism.

Banks that provide Standby Letter of Credit are likely to get more customers as they provide you amazing international trading opportunities.

How to get an SBLC?

You can simply ask your bank or your finance company to provide you one. But make sure you understand all the terms and conditions first; then you proceed further with everything.

Any bank instrument proves to be quite beneficial for monetizing and there is no doubt about it. There are a lot of companies other than banks, who provide bank instruments at your service. “The Hanson Group of Companies”, one of the well-known lease BG SBLC providers.