How To Apply for A Standby Letter of Credit
How To Apply For A Standby Letter of Credit
The File That Moves Versus The File That Dies
Two requests look similar at the start. One brings audited numbers, a draft under ISP98 or UCP 600, a purpose the beneficiary accepts, and a plan for collateral. The other asks for MT760 now, success-only, and “fees from proceeds.” The first becomes an issuance and, if needed, a confirmation. The second goes nowhere. We focus on the first.
Rule Sets And Messaging
- ISP98 — on-demand standby practice. Default choice for most SBLCs.
- UCP 600 — documentary credit rules when the standby requires documents beyond a simple demand.
- URDG 758 — demand guarantee rules when a guarantee is the correct instrument.
SWIFT: issuance via MT760, amendments via MT767, pre-advice or free-format via MT799. Advising and authentication are bank-to-bank.
Bank Application Steps
- Pre-screen. Applicant package with financials, purpose, beneficiary details, and draft wording under ISP98/UCP 600 or URDG 758.
- KYC and sanctions. Applicant, UBOs, and counterparties cleared before any actionable term sheet.
- Credit review. Limits, cash flow, leverage. Decision on margin and acceptable security.
- Collateral agreement. Cash margin or pledged assets into controlled accounts with a trustee or security agent.
- Text approval. Legal review of draw conditions, expiry, place of presentation, and governing rules.
- Issuance. MT760 sent. Advising bank authenticates. If required, the confirmer books its undertaking.
Required Documents And Common Pitfalls
| Document | Why It Matters | Frequent Mistake |
|---|---|---|
| Audited financials | Funds cash-flow and limits tests | Out-of-date or management-only statements |
| Underlying contract | Shows purpose and beneficiary conditions | Missing governing law or vague performance triggers |
| Board resolution | Authority to issue the standby | Unsigned or inconsistent signatories |
| Collateral schedule | Defines margin, pledge, and control mechanics | Old valuations or no account-control path |
| Draft SBLC text | Aligns rule set and draw mechanics | Wrong rules, wrong expiry, no place of presentation |
When Collateral Is Thin, We Run Two Tracks
Track A — Collateral Raise (Private Debt)
- Structure a pledged cash or asset-backed facility sized to the shortfall.
- Trustee or security agent, account control, escrow mechanics.
- Pricing: coupon plus OID or closing fee. Rating work if size or investor base requires it.
Track B — Issuance And Confirmation
- Finalize wording under ISP98, UCP 600, or URDG 758.
- Issuing bank route. Confirmation added when the beneficiary or jurisdiction demands it.
- Fee letters, authentication, SWIFT setup. Monitoring through expiry.
Issuing And Confirming Banks We Work With
| Region | Issuing Banks | Confirming Banks |
|---|---|---|
| North America | JPMorgan, Citi, Bank of America, Wells Fargo | BNP Paribas, Santander, Standard Chartered |
| Europe | HSBC, Barclays, BNP Paribas, Santander, Commerzbank, UniCredit | Commerzbank, Raiffeisen, UniCredit |
| Asia | MUFG, Mizuho, SMBC, DBS, OCBC, Standard Chartered | MUFG, SMBC, DBS, OCBC, ANZ |
| Middle East | First Abu Dhabi Bank, Emirates NBD, QNB | Selected European and Asian banks with ME desks |
Each bank applies its own policy, KYC, sanctions, and country limits. Availability is case by case.
Pricing — Arranger, Collateral Raise, Issuance, Confirmation
| Workstream | Fee Basis | When Charged | Notes |
|---|---|---|---|
| Arranger retainer (Financely) | USD 75,000 to 250,000 | At mandate | Funds structuring, bank approach, wording, diligence coordination |
| Arranger success fee | 0.75% to 2.00% of face | On issuance and or confirmation | Trigger defined in mandate |
| Collateral facility (private debt) | Coupon plus OID or closing fee | At collateral close | Typical coupon 10 to 16 percent per annum; OID or closing 1 to 3 percent |
| Issuance fee (issuing bank) | 0.50 to 2.00 percent per annum | On issuance | Pro rated for tenor; credit and country sensitive |
| Confirmation fee (confirming bank) | 0.50 to 3.00 percent per annum | On confirmation | Issuer and country risk driven |
| Legal, trustee or security agent, escrow | Itemized schedules | At signing and as incurred | Security docs, account control, opinions |
| SWIFT, advising, amendments | Bank tariff per event | As incurred | MT760 issuance, MT767 amendments, courier if required |
| Rating (if required) | USD 40,000 to 250,000 plus | As incurred | For note programs or insurance investors |
Closing Procedure And Timeline
| Day | Milestone | What Happens |
|---|---|---|
| Day 1 | Mandate and intake | Sign mandate. Submit applicant financials, KYC, purpose, draft wording, beneficiary details |
| Day 3 to 7 | Collateral term sheet | Private debt soft clear. Define pledge or cash collateral with trustee or security agent |
| Day 8 to 14 | Wording and bank route | Finalize ISP98 or UCP 600 or URDG 758 terms. Identify issuing and confirming banks. Price bands agreed subject to approval |
| Day 15 to 28 | Approvals and documents | Collateral docs and opinions. Account control. Issuing bank credit approval. Fee letters signed. SWIFT setup |
| Day 29 to 35 | Fund collateral | Private debt funds backstop. Pledge or escrow in place |
| Day 36 to 45 | Issuance and confirmation | MT760 sent. Advising bank authenticates. Confirming bank books its undertaking if required |
| Day 46 plus | Monitoring | Amendments via MT767 if needed. Monitor until expiry or cancellation. Collateral facility reduces as obligations fall away |
SBLC Pricing Simulator (Indicative)
Answer a few questions to see a ballpark of upfront costs and annual charges. This is a guide, not an offer.
Assumptions: retainer and ranges per tables above; legal and trustee placeholder USD 85,000; SWIFT and advising USD 7,500; OID or closing on collateral 2 percent; private debt coupon varies by risk and collateral type. Fees scale with face value and risk.
Request The Contract
We will return scope, fee terms, and the bank route aligned to your case.
Request the ContractFinancely acts as arranger and advisor. We are not a bank. All engagements require KYC and sanctions screening. Banks and private credit funds make independent approvals and set final pricing. Ranges above are indicative and depend on applicant strength, tenor, amount, jurisdiction, and instrument terms. Nothing here is a commitment to lend or a binding quote. Any securities activity is conducted through a licensed chaperone, Member FINRA/SIPC.
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