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BRIAN BROWN

CEO

BrianBrown@mmglobalinc.ca

ROAN BROWN

COO

RoanBrown@mmglobalinc.ca

ANTHONY BROWN

CONSULTANT

AnthoneyBrown@mmglobalinc.ca

DESCRIPTION OF STANDBY LETTERS OF CREDIT (SBLCS)

Lease Price: 10+2
Purchase Price Low: 40s + 2

This is for both purchase and lease. However for lease client has to pay swift fee of 250k USD per 100M SBLC, once the contract is signed.
1. Client submits a full kyc, that includes pof in the form of a bank statement and history of funds must be clearly expressed. POF can done on a bank to bank basis or can be sent directly to the provider.

2. Once client passes DD, contract is signed.

3. Provider sends 799 pre advice.

4. Clients bank sends BPU

5. Provider sends 760.

6. Clients bank sends payment by MT 103 in 3 to 5 days.

7. Then hard copy

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What is a Standby Letter of Credit?

Standby Letters of Credit is issued by a bank as a payment guarantee to assure the seller that in the event of the buyer’s default in making the payment, the bank will be liable to pay the specified amount as per the agreed contract.

With the issuance of SBLC, the bank is undertaking the payment commitment on behalf of the buyer. So, before issuing SBLC, the buyer’s bank will verify the credit quality of the buyer. Once the buyer’s bank is satisfied with the credit history, they will provide a written undertaking to the seller’s bank. This is to assure the payment commitment towards the seller, in case of the buyer’s default.

Since the Standby Letters of Credit is issued after verifying the creditworthiness of the buyer, it stands as a symbol of faith in trade transactions. At the same time, it also acts as proof of the buyer’s financial worth and payment skills. Further, it can serve as a surety to avail credit lines; for those who want to do their business without using their assets.

For businesses, the benefit of having SBLCs is that they can come out from the worst-case scenario at ease. Likewise, in today’s competitive world, traders face difficulties in competing against bigger and better projects. But, having SBLC gives a global status to the buyer’s profile. Even more, it helps them to get the deal awarded with ZERO upfront payment to the seller.

SBLC Issuance

Usually, SBLCs are issued via MT760 on behalf of the buyer and in favor of the seller as an Irrevocable SBLC. This is to say that once it has been issued & transmitted via SWIFT MT760, it cannot be revoked or canceled.

However, it can be transferred or assigned to another party upon written confirmation from the first party. But, based on the fact, that the transferring banks must notify the issuing bank about the amount of SBLC transferred along with the effective date of transfer.

Parties Involved in the Standby Letters of Credit

  • Applicant – It’s a client who requests to issue MT760. At the same time, to get the MT760 issued, they should have enough credit lines. Or else, they have to provide financial security or cash margin.
  • Beneficiary – The supplier, who receives the SBLC in their account.
  • Issuing Bank – The applicant or buyer’s bank facilitates the issuance of SBLC.
  • Correspondence / Advising Bank – The bank, who advises the issued MT760 to the supplier’s bank on behalf of the buyer. Further, this happens, in case, if the issuing bank doesn’t have a direct relationship with the supplier’s bank.
  • Supplier’s Bank – The bank, where the supplier maintains their bank account.  Also, the advising bank works for the supplier in keeping the fiscal tool in the banking system.

Benefits to Avail Standby Letters of Credit

As a Buyer,
  • You don’t need to provide any collateral or cash margin to us. In addition, you don’t need to have a direct relationship with our bank.
  • Having MT760 shows your fiscal worth to do trade. Further, this may enhance your status to do business with traders both locally and globally.
  • MT760 helps to reduce risks, boosts production, and also assists to optimize profit.  Even more, this makes the local and global trade deals safer and secure.
As a Supplier,
  • Payment is confirmed; if you comply with the T&C’s as per the issued MT760s.
  • In case, if the buyer goes bankrupt or fails, the issuing banks will make the payment for you on behalf of the buyer.
  • Ensures you will get the payment in a specified currency within a set time period.

How Much Does an SBLC Cost?

The cost of SBLCs mainly includes commission, processing fee, swift charges, and also the advising fee.

Further, the SBLC fee may also vary depending upon the tenure of MT760. Mostly, the issuance fee of SBLCs is based on the value of the SBLC. Also, the fees will be borne by the buyer and it should be stated in the issued SBLC.

If you’re planning to apply for SBLC from your bank, they may require a 100% collateral or cash margin to proceed with your SBLC request. But in most cases, traders won’t have funds available to provide cash margin to the bank to get the required SBLC. In this case, their Standby LC request will be rejected by their bank.

If you are looking to get SBLC MT760 without a cash margin, you can contact us with your SBLC request.

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