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Alternative Funding Sources for Businesses

Banker’s Guarantee (BG) & SBLC

Banker’s Guarantee (BG) & SBLC

BANKER’S GUARANTEE

When you submit a tender, or need a guarantee of payment to a supplier or a business partner, you can use a Banker’s Guarantee as a viable alternative to cash deposits.

Advantages of using Banker’s Guarantee:

  • Widely accepted, giving recipients more confidence in your company’s financial credibility.
  • Free your funds to pursue other business opportunities.
  • Low charges from 0.6% – 2.25% pa, with a minimum of RM50.

STAND BY LETTER OF CREDIT (SBLC)

By definition, a SBLC (Standby 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” by the good credit of the bank, allowing clients use a “conditional collateral” if needed.

The SBLC is commonly used when two parties enter into a contract calling for one party to arrange a L/C in favor of the other. With any Stand by Letter of Credit, the agreement is the SBLC will NOT be “drawn” unless the owner defaults on the contract. If the beneficiary was to monetize the SBLC without prior agreement, the owner could dispute the contract in court. The truth is, SBLC’s are rare and used mostly in industrial or bulk commodity sales, serving as a “performance bond” of sorts.

Beware of SBLC Leasing Scam!

In recent years, the SBLC has become very popular in the private placement business. In most cases, “providers” claim to have the SBLC issued from the bank for a small upfront fee. Supposedly, once the SBLC has been received by the investor, they can use it as collateral for private placement and other business opportunities. Though this sounds great to naïve investors, the truth is, SBLC leasing never works.

First of all, SBLC’s are not discountable instruments, and no bank will “cut” an SBLC for a small upfront fee. Second, if the investor plans to attain an SBLC, they must give the full value to the bank before they issue it. In short, you can’t walk into a bank with 1 million and get a 10 million SBLC. Despite what many brokers may claim, leased SBLC’s are not the way to go, no matter what type of transaction you are pursuing.

1 comment so far

yusyino Posted on 3:12 pm - 12/02/2019

“First of all, SBLC’s are not discountable instruments, and no bank will “cut” an SBLC for a small upfront fee. Second, if the investor plans to attain an SBLC, they must give the full value to the bank before they issue it. In short, you can’t walk into a bank with 1 million and get a 10 million SBLC. Despite what many brokers may claim, leased SBLC’s are not the way to go, no matter what type of transaction you are pursuing.”
The above is impossible to materialise without with cash collateral and the owner himself. Euroclear Online, Onscreen by the cash collateral owner who is the member of Euroclear bank is the ONLY authorised person to carry out this procedure. Without this capability, the so-called owner will never able to show the proof and of course would never dare to present at the bank (which is coordinated by the investor who is interested to deal with the cash collateral owner) to carry out this procedure, as one of due diligent parameters which need to be carried out in order to determined the genuinity of the cash collateral owner.