Stand By Letter of Credit (SBLC)/Bank Guarantee (BG) Program

(SBLC Financing)

A Stand-By Letter of Credit (SBLC) is an assurance that your company has the financial resources to perform as agreed under contract. The issuing Bank essentially substitutes its credit standing for that of your company in order to facilitate the contract. Stand-By letters of Credit are legal documents that support contractual agreements between two parties. The standbys are concerned only with the contractual agreement you have made with another party and are payable only when the appropriate documentation as outlined in the letter of credit is presented by the beneficiary. If the customer defaults, the beneficiary may draw funds against the letter of credit as penalties or as payments, whichever the terms of the credit provide.

STAND-BY LETTER OF CREDIT PROGRAM SUMMARY

REAL PROPERTY STAND-BY LETTER OF CREDIT FINANCING PROGRAM

1. Purchase of Standby Letter of Credit (SBLC), generally at a $20,000,000 face value. SBLC has a term of one year plus one day (see below for SBLC Purchase Program features).
2. Transfer SBLC to Lender, together with 15 yr interest only Note, interest rate of LIBOR +2%.
3. Lender funds 95% of face value of SBLC ($19,000,000), less 10% of face value in fees (all fees included), so borrower receives 85% of face value of SBLC.

Clients can use Stand-by Letters of Credit for many reasons such as:

• Leverage Funding for Large Commercial Projects
• Funding a Trading Platform
• Credit Enhancement
• Blocked Funds
• Qualify for Financing
• Net Worth Requirements
• Providing Evidence of Proof of Funds
• Commodities / Petroleum Transactions
• To provide assurances of our Client’s ability to perform under the terms of a contract
• To fulfill bid-bond and performance-bond requirements
• To help secure third-party financing

General terms and conditions:

SBLC 85% funded amount must be paid in one year and one day. May be extended up to a total of five years at a cost of 8% for second year, 6% for third year, 4% for fourth year or 2% for fifth year.

Needs List and Procedures:

First Capital Funding Corporation utilizes these SBLC instruments to collateralize commercial property loans.

Letter of Credit Request Procedure:

A request for a Letter of Credit is made from a client directly or may be referred to FCFC. FCFC requires all the documentation and information indicated below.

FCFC will issue a Letter of Engagement to the client, which discloses the points associated with this transaction, which is separate from the Lenders fees. The fee is generally 2 points. Once the letter of Engagement is executed (signed) and returned to FCFC, FCFC will proceed with the request. (Up to this point no monies have been collected unless indicated on Letter of Engagement.

Information Required for an SBLC Request:

• Executive Summary describing project and use of funds.
• Proof of Funds for SBLC request: (need to see a minimum of 10% of SBLC request)
• Bank Statement (recent within 30 days)
• Bank Letterhead indicating the account holder, account number and amount in that account that is available and accessible funds for our client (an escrow letter alone is not sufficient.)
• In the event there are silent partners/ investors that are not principals, proof of funds from them may be used as long as a paper trail evidencing that the principals have access and is permissible to use these funds for the specific transaction. This must be noted in writing from the account holder.

Proof of Funds for commitment fee for lender: (need to see where the commitment fee is coming from if different than proof of funds for SBLC)

• Bank Statement (recent within 30 days)
• Bank Letterhead indicating the account older, account number and amount in that account that is available and accessible funds for our client (an escrow letter alone is not sufficient)
• Corporate ID (Articles of Incorporation or Articles of Organization indicating principals along with Corporate ID#)
• Drivers License (for all principals)
• Passports for International deals (for all principals)
• Name of Corporation, Address, Phone#, Fax#, and email address along with names of all principals indicating the main contact person.
• Referral Name, Address, Phone#, Fax#, and email address
• Sources and Uses (to indicate the breakout)

Note: In the event you have multiple LC requests, they should be sent independently. Executive Summaries will differ.

Once the above documentation has been received it will be forwarded to the SBLC provider. The SBLC provider will then process the request and issue an SBLC draft and send to FCFC within 3-5 business days depending on the complexity of the request and documentation received.

When FCFC receives the SBLC draft, we then will forward a copy to the lender along with the above noted documents (as indicated above required docs for SBLC)

Lender will notify FCFC of their decision, and if approved a commitment letter will be generated and forwarded  to FCFC to forward onto the client. All terms and conditions of the loan along with the amount of the commitment fee will be outlined in the commitment letter. The dollar amount of the commitment fee will depend on the loan amount. The commitment fee will be required at the time the borrower signs the commitment letter. The Lender’s bank wiring instructions will be included.

The commitment letter will be signed by the client and returned to FCFC who will then forward the information to the lender.

Commitment fees outline in the commitment letter will be wired to the designated account simultaneously with the commitment letter.

Once the signed commitment fee is received by the Lender, the Lender will issue a letter outlining all bank  and swift information which confirms their receipt of the commitment letter and a commitment fee. This letter will be sent within 3-5 business days (original) via DHL/FedEx and also faxed the day issued.

Once the letter is received, the SBLC issuer is notified to swift the collateral (the Official SBLC) they then will fund via SWIFT within 3-5 business days.  The Stand-by Letter of Credit Program process above is a general rule and will vary depending on the transaction.

Non-Leased Cash backed SBLC or BG

There are instances when a client requires a non-leased cash backed Bank Guarantee or SBLC to be able to borrow against it at higher levels.  We can provide that in amounts of 10 MM to 10 Billion.  Make sure you mention this particular instrument when you call or contact us.

This process is excellent, because:

• You have real instrument, it is not a leased one
• Do not require to have the instrument fees in a bank account, they are simply deducted from the requested amount
• Your bank will be the beneficiary
• You can use the instrument as credit enhancement
• This is a third party transaction, therefore you can tell your bank what to do, not the other way round

After all parties have signed the “hard” contracts the bank of the investor will talk to your bank.  They can arrange for a MT199 (stating that the investor bank is RWA to send) Only after that your bank prepares the MT103/23 (not sending it) Then the bank to bank negotiation starts with MT799 and MT760.

From start to finish this process takes about 3 weeks.

* IMPORTANT:  You will be checked out thoroughly so make sure that you are “real” and able to pay for the fees before applying.  And they only work with A and AA rated banks.

The fees on this program are higher than the leased SBLC/BG however, you can obtain the desired instrument without any cash, only a viable project and A and AA rated bank

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Note: All Accounts require strict compliance with International. Money Laundering Regulations and the US Patriot Act.

SBLC Monetization/BG Monetization/CD Monetization – Monetize SBLC

Bank Instrument Monetizing

In order to monetize a sblc (SBLC Monetization) you must be in possession of the instrument and it must be paid for prior to monetizing (Prior to requesting monetization).

**** If you do not own an instrument we can do that for you. Fill out the online form or call us at 800-346-0136 today.****

First Capital Funding Corporation has developed relationships with some of the Top banks in the world to Monetize Bank Instruments for clients worldwide by arranging the monetization against owned bank instruments such as BG’s (Bank Guarantees), LOC’s (Letter of Credit), SBLC’s (Standby Letter of Credit), CD’s (Certificate of Deposit), DPLC’s (Direct Pay Letter of Credit) and other banking and financial instruments.

This form of financing can be used in combination with our cash backed stand by letter of credit (SBLC) or Bank Guarantee (BG) Program in order to monetize the newly created document to obtain the right funds for project financing

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. We can monetize CD’s, SBLC’s, DPLC’s, BG’s and MTN’s. This can be accomplished in 5-8 business days.

Monetizing a sblc or stand by letter of credit is becoming rather common and can be done in as little as 4 days. Many people refer to this as sblc funding or sblc financing since you are essentially obtaining cash on the basis of the sblc or bank guarantee.

This process allows you to:

* Monetize instruments for cash
* Monetize instruments for buy/sell platform entry
* Monetize instruments for both cash and buy/sell platform entry

SBLC Monetizing Program Highlights

* $20 Million to $10 Billion USD
* The letter must be from an A or AA rated bank.
* Must contain the following 5 phrases: ”Irrevocable”, “divisible”, “transferable”, “assignable” and “unrestricted”.
* 1-3 year term
* Interest only loan
* 300-450 basis pts over prime rate
* Bank fees apply
* 1-3% of advanced amount required to be as proof of funds as verified by a bank officer.
* 5-8 day closing
* 85-97% of face value advance

SBLC/BG $10-20 Million Program Highlights

* The letter must be from an A or AA rated bank.
* Must contain the following 5 phrases: ”Irrevocable”, “divisible”, “transferable”, “assignable” and “unrestricted”.
* 1-3 year term
* Interest only loan
* 300-450 basis pts over prime rate
* Bank fees apply
* $30-50k required to be as proof of funds as verified by a bank officer.
* 5-8 day closing
* 85-97% of face value advance

To apply simply complete the online form and fill the details of the request in the comments section.

Case Study-SBLC Monetizing or SBLC Monetization:

If you lease a bank guarantee or sblc we can help. In this case study the client needs $25,000,000 to secure the purchase of land needed for a project. Client has a Cash Backed SBLC from Deutsche Bank, an AA rated bank. Client submits SBLC for monetization and gets 97% of the SBLC’s face value minus bank fees of $44k. Terms: 2 year, interest only, 6.75%. Closing time: 4 days.

Click here to visit our main page about Monetizing a SBLC/BG or CD

By Barbara Kiviat

There are plenty of reasons to believe that small businesses aren’t getting the credit they need. In the last three months of 2009, business lending at smaller banks, which tend to cater to smaller companies, was down at a 13% annual rate, according to the Federal Reserve. Not only are loans harder to come by, but they’re also more expensive. That has the potential to slow down economic recovery, since firms that can’t borrow often can’t expand.

Policymakers have responded with a number of programs to boost small-business lending, including an Obama Administration proposal to repurpose $30 billion of bank-bailout money to spur more business lending at community banks.

Talk to business owners, though, and the picture is a lot more complicated. A poll conducted at the end of last year by the National Federation of Independent Business, a small-business trade group, found that companies were overwhelmingly more concerned about slow or declining sales than access to credit. A full 51% of businesses cited sales as their top concern, while only 8% cited the ability to borrow money. An additional 22% cited uncertainty as their biggest worry. In unstable times, even healthy companies are unlikely to want to take on debt.

This is a question that usually starts the conversation for many clients seeking a standby letter of credit (or SBLC). But first lets start with the wiki definition of a stand by letter of credit.

Wikipedia says: A standard, commercial letter of credit is a document issued mostly by a financial institution, used primarily in trade finance, which usually provides an irrevocable payment undertaking.

The key word being financial institution as the financial institution or bank issuing the stand by letter of credit (SBLC).  The cost of the leasing for this instrument is determined by the bank.  This cost for leasing a block of money in the name of the client  ranges between 5-12%.  Sometimes more and sometimes less.

As with any transaction there is a cost of placing the request with the bank or institution by financial professional, intermediary, financier or broker.  The cost ranges between 1-5% of the stand by letter of credit amount and it is normally paid up front together with the bank lease fee.  This amount is placed in escrow with the Bank’s attorney or escrow service pending the final issuance of the instrument.

Due to its ease and the way transactions are structured, standby letter credit transactions are often the target for scammers who pose as intermediaries asking for the upfront fee without ever intending to place the deal anywhere.

These scammers operate from Africa and some European countries looking to swindle american clients posing as an American company.

The same goes forAmerican scammers who look to take advantage off European clients by requesting an up front fee.

standby letter of credit wiki, standby letter of credit fraud, standby letter credit vs letter credit cost of standby letter of credit, revolving standby letter of credit.

To get more information about obtaining a stand by letter of credit (SBLC) or to submit a request please visit First Capital Funding Corporation SBLC page here.

A topic that has come up the last week is the lack of funds for new or young small business.  Many entrepreneurs are being given so much advice in this economy that often they don’t see how to get going or get working capital for their new business.  Banks and local credit unions are not lending and to go on the internet to look for funds is often a wild proposition.  There is a way and is rather simple.  Is more like a plan.  My advice which you can say it’s based on the plan that I have formulated for my friends and clients is this:

1. Get your business registered-started.  Get your DBA, corporation and internet domain name.  You can get a DBA or “doing business as” registration for a nominal charge.  You can also incorporate, (S, C or LLC) for very cheap.  Get your business on the clock so when lenders ask for how long you have been in business you can say a date other than “Last week”.
2. Get a business checkingsavings account.  This is a minimum requirement for any business.
3. Get a Business Plan. Having one is not necessary but will help you in organizing your business and identifying your market base.
4. Set up a merchant account.  This will help you in taking credit cards as payment which will make it easy to get more business as not all people pay in cash.

After 3 months in business you can use your credit card receivables as the qualifier to get the working capital loan that you need to expand and get rolling.

Granted, the initial cost to get your business started might run you $700-1000, but that will get you going so you can get your customers which in turn will keep you alive for the initial 3 months until you can qualify for the credit card based loan.

The FDIC just came out with their 4th quarter 2009 report and this is some of what is in it:

Banks Report Further Declines in Loan Balances
Total assets of insured institutions fell for a fourth consecutive quarter, declining by $137.2 billion (1.0 percent). During the year, total industry assets declined by a net $731.7 billion (5.3 percent), the largest percentage decline in a year since the inception of the FDIC. Total loan and lease balances declined for the sixth quarter in a row, falling by $128.8 billion (1.7 percent).

The fourth-quarter decline was led by C&I loan balances, which fell by $54.5 billion (4.3 percent); real estate C&D loans (down $41.5 billion, or 8.4 percent); loans to depository institutions (down $21.2 billion, or 15.9 percent); and residential mortgage loans (down $11.2 billion, or 0.6 percent). Credit card balances increased $29.1 billion during the quarter (7.4 percent), but balances in all other major loan categories declined.

Insured institutions continued to add to their securities holdings. Slightly more than half of all insured institutions (52 percent) reported declining loan balances in the fourth quarter.

Total securities increased by $103.7 billion (4.3 percent) during the quarter, with mortgage backed securities rising by $44.8 billion (3.3 percent), and U.S. Treasury securities increasing by $15.9 billion (18.3 percent). During 2009, insured institution securities holdings increased by $465.1 billion (22.9 percent).

You can read the whole report here or download the pdf file.

Are you presently factoring, or thinking of factoring your receivables?

If that is the case then there are some things you need to know before you embark into a factoring relationship.  And YES, it is a relationship. First, being in the factoring business for many years I have seen my share of business proposals where the client is seeking a factoring facility and decides to shop around for the “best rates”.

Please take time to read this article because I will save you lots of money and time.  Other competitors will disagree into telling a client what the real aspects of factoring are before they get into.  Many will argue that what they don’t know it won’t hurt them.  I disagree.

I prefer to work with a wise factoring client. Why, because he can see what the real benefits and advantages are in what I am proposing and even tailor their factoring facility to their business.  This will make the client happy as the results will be better than anticipated.

Wise or Smart clients tend to make good and informed decisions about whom they wish to work with.

So lets get to the issue of “Factoring Rates”.

Like other lending products, factors quote a “rate”, but neglect to detail the true effective cost, or rate, of the capital being accessed.

Rate and effective rate are 2 different figures, and total up to 2 significantly different results!

For example, when you read the fine print for a bank loan or mortgage, you’ll see terms like “rate” and “Apr” for the same loan.

Often, APR is a higher, but unless there are substantial loan origination points, the difference between “rate” and “Apr” are almost negligible.

However, sometimes there can be a large difference between the rates you think you’re paying versus what you actually pay — the effective rate.

And, funding companies, including many well known factoring companies, disguise the true cost of your capital.

So what is the real issue on this article.  Simple; Whenever you hear a “great low rate” by “Company or Factor A” you will find it to be considerably different than the actual true ‘effective rate’ is.

Inevitably, when confronted with this fact you are likely to be met with utter silence.

The more honest factors may actually admit they have no idea about what you are referring to, or they’ll flat out concede that they have no idea what the difference is and what they are paying.

If you don’t know the answer either, don’t feel bad. You’re not alone.

Here’s the real issue: funders of all types — not just factoring companies — can dramatically enhance their returns, meaning their effective rates through transactional structuring.

Here are some examples of return enhancers for factors. Do they look familiar to you?
term agreements

• minimum monthly fees

• fee periods longer than 10 days,

• minimum fee periods

• volume requirements and associated penalty requirements

• reserve escrow accounts

• fee float days

• credit approval charges

• blanket assignments of all accounts,whether factored or not treatment of non-factored invoices

• clever tack-on fees for itemprocessing or electronic transfers

• requirements that all invoices be factored or that all be factored at once without the option of aging prior to factoring

• batch accounting rather than individual invoice accounting

As you can see there are quite a few items in this list that can easily be justifiable that will effectively increase your cost for the money.

Can you see how an initial low rate can be disguised this way to get you on the hook for all these fees?

If you are already factoring some receivables you will certainly recognize some of these fees if not all.

Are these fees standard in the industry?  Absolutely not.  Specially not when working with First Capital Funding Corporation.

Wouldn’t you prefer if your factor stated what these fees are ahead of time and how they affect your effective rate?

If you are experiencing any of these items listed above, I can assure you that your actual effective cost of capital is higher than you’ve previously thought.

How can we help?

Indeed I can.  I must admit that there are many aspects of a factoring transaction that can confuse most business owners.  Fortunately you are not alone and we are here to help you weed through all these uncharted waters to get the best deal you can possibly get.
If you are interested in a no cost consultation simply call 800-346-0136 Ext 2.  or click this link