|
Project owners can apply for lines of credit with their own bank to support the financing of their project. Normally the credit line needs to have some collateral backing it, which is where a bank guarantee letter (BG) can come into play. There are options for project owners to either lease or buy a bank instrument. A bank guarantee such as an SBLC is backed by collateral for one year and one day and then you can decide whether or not you want to renew the lease?. If the bank guarantee isn’t renewed, then it has be returned unencumbered.
When leasing or purchasing a BG from a bank instrument provider, there will always be a fee involved. This has to be made very clear in the agreements. The difference between the purchased and leased amount can be a huge amount of money. |
|
It is very hard to find genuine providers of bank guarantees. There are many service providers for BG’s on the internet, it’s quite hard to say who is legitimate. Trying to source providers can be VERY risky, it can also be a waste of time and be an expensive way to do business. You have to be incredibly diligent and very careful in who you deal with in this area of finance using Bank Guarantees. The internet is fraught with those who proclaim that they obtain BG’s whereas more often than not they are only seeking fees. This is why our Policy is built around client comfort and protection.
|
|
Bank Guarantee Procedures
International Financial instrument providers, work hand in hand with each other for the purpose of funding projects. Each part of the transaction process work as a whole by having pre-arranged agreements with one another. When you Have agreements with Providers. it helps a great deal help towards minimizing risk during any part of the financial transaction. We call this a ‘close ended’ transaction. Where all possible, safeguards have been put in place to ensure maximum protection of client’s money. Banks will adhere to ICC banking rules as well, will operate under the regulatory framework within the country the operate in. That and depending on what process we are utilizing, there may be insurance bonds put into place to protect client’s funds. There are are many options when applying for a Bank Guarantee, whether you pay the SWIFT fee or not to levels of comfort you need that the Provider will perform. As with Closed End Transactions, it is the best way to manage the issuance and monetization of a Bank Guarantee. Additional layers of security are added to help streamline the process. In cases of project financing, where the instrument serves as a collateral, The BG security fees are not handed to the provider until a pre-advice MT799 has been delivered by SWIFT. If the Provider can not cannot perform, you will have an agreement in place that the fees will be returned. There’s always some kind of paper trail and it is standard practice that receivers will get a hard copy of the instrument once all fees have been remitted. As a company we are not risk takers and therefore work with service providers who have done their utmost to put safety measures in place to minimize risk to the best of their ability.
