How To Monetize a Standby Letter of Credit (SBLC)

An SBLC is a bank’s promise—either to pay or to ensure performance—not cash sitting in an account. Monetizing it means turning that guarantee into working capital today by structuring a financing package around the real transaction it supports—be it a commodity shipment, construction milestone, or service contract. Since issuing banks almost never allow second liens on an SBLC they’ve already guaranteed, our financing is underwritten against the underlying contract network, not the SBLC alone.

What Is SBLC Discounting?

SBLC discounting lets you sell your letter of credit at a negotiated haircut—typically 1%–3% of face value—in exchange for immediate liquidity. Unlike asset-based loans secured by inventory or receivables, this approach relies on the issuing bank’s creditworthiness plus the commercial strength of the contract network. You receive cash now, maintain off-balance-sheet treatment, and avoid pledging additional collateral.

• Issuing Bank: Guarantees payment or performance under your contract.
• Beneficiary: Your company, holding the SBLC.
• Discounting Lender: Our global lending partners, advancing the cash.

Why SBLC Monetization Is Necessary

Tying up working capital while you wait for an SBLC to expire or be drawn upon can stall projects, strain vendor relationships, and limit growth. Monetization unlocks that contingent right today—transforming a future promise into cash for payroll, inventory purchases, or strategic investments. It’s the difference between watching an opportunity slip by and having the funds to act immediately.

How the Underwriting Process Works

Every legit SBLC monetization starts with proper underwriting by Financely’s in-house credit and compliance team. We don’t rely on guesswork—our analysts dive into both bank and contract risk to protect you and our lenders.

Step	Activity	Timeline
1. Document Submission	Provide original SBLC, audited corporate docs, beneficiary ID, and underlying contract details (e.g., POs, service agreement).	Day 1–3
2. Credit & Compliance Review	Assess issuer rating (AA+ or above), verify SBLC expiry (≥90 days), review governing law, underwrite contract economics.	Day 4–10
3. Term Sheet & Fees	Present discount rate, advisory fee, and underwriting fee—each transparent and deducted at funding.	Day 11–14

Funding Timeline (21-Day Guarantee)

Phase	Milestone	Target Day
Intake & KYC	Complete KYC, deliver docs	Day 1
Underwriting Sign-off	Term sheet executed	Day 14
Disbursement	Funds wired to your account	Day 21

Fees & Pricing

We ask for our advisory and underwriting fees up front as part of the term sheet, ensuring transparency. All fees—discount, underwriting, advisory—are deducted at closing so there are no surprise charges.

Fee Type	Description	Range of Rates
Discount Fee	Haircut on SBLC face value	1.0%–3.0%
Underwriting Fee	Credit & compliance review by our team	0.1%–0.5%
Advisory Fee	Structuring, legal liaison & bank coordination	0.1%–0.4%

What Lenders Want to See

Presenting a full, polished package moves you to the head of the line and often secures better pricing. Our lenders expect:

Requirement	Details
SBLC Wording	No conflicting amendments; clear expiry and draw conditions
Issuer Credit	Investment-grade bank (AA+, A1 or better)
Contract Clarity	Detailed POs, service agreements, or project schedules
Beneficiary Financials	Recent audited statements showing strong cash flow
Governing Law	ICC UCP or recognized jurisdiction (e.g., New York UCC)

Common Misconceptions & Red Flags

• No underwriting needed: All credible SBLC financings are underwritten by experienced analysts.
• Upfront fees: We require advisory and underwriting fees up front as part of the term sheet to cover real work—this isn’t a red flag, it’s standard practice.
• Instant liquidity for any SBLC: Only guarantees meeting strict issuer, expiry, and contract criteria qualify.
• Shadow-market shortcuts: “Non-recourse” loans are exceedingly rare; most structures include recourse or covenants tied to the underlying deal.

Why “No-Underwriting” Schemes Are Scams

If someone promises you cash without a thorough contract review and bank confirmation, run the other way. They’ll vanish once they hold your SBLC—no lender will honor an unverified guarantee. Proper underwriting by Financely’s credit and compliance team is the only path to real funding.

How Financely Puts You on the Fast Track

Our in-house underwriting team combines capital markets expertise with deep lender relationships. We handle structuring, credit analysis, compliance, and distribution under one roof. With our transparent fee model—discount, underwriting, advisory—all settled at funding, routine SBLC discounting transactions clear compliance and fund within 21 days, delivering the cash you need, when you need it.

Frequently Asked Questions