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.

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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.