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.