How To Secure a Standby Letter of Credit (SBLC) for Your Trade or Project

Master the process of SBLC issuance—from pre‑qualification to execution—to ensure you get the bank‑backed guarantee you need, when you need it.

1. What Is an SBLC—and Why You Need One

A Standby Letter of Credit (SBLC) is a standby guarantee issued by a bank on your behalf. It assures your counterparty—supplier, buyer, or project owner—that if you default, the bank will meet financial obligations. It’s the financial haircut that unlocks larger deals with confidence.

2. Who Benefits from an SBLC?

• Commodity traders and brokers securing prepayment or delivery commitments.
• Importers/exporters guaranteeing performance obligations under long‑term contracts.
• Infrastructure contractors needing bid or performance guarantees.
• Energy and mining firms working in jurisdictions that demand financial assurance.

3. Core SBLC Terms & Structure

Your SBLC stands on critical building blocks:

1. Issuing Bank: Tier‑1 institutions such as JPMorgan Chase, Standard Chartered, CCB, BNP Paribas.
2. Beneficiary: The party receiving the guarantee—supplier, buyer, or project owner.
3. Face Amount: USD 2 million to 100 million, backed by collateral or cash margin.
4. Tenor: Typically 90–365 days, extendable to 18 months.
5. Fees: Issuance fee: 2.0–4.5% p.a.; arrangement fee: 1.5–3.5% of face value; SWIFT/legal costs.
6. Security: 100% cash or partial collateral (30–50%) backed by credit insurance or bank comfort letters.
7. Covenants: Restricted use, quarterly reports, no adverse changes without notice.

4. Engaging With Financely: Your Path to SBLC

Step	Description	Timing
Submit Deal Brief	Upload contract, proforma, scope and collateral details.	Day 0
Engagement & Retainer	Sign engagement letter, pay USD 25K–100K retainer depending on deal complexity.	1–2 days
Documentation & KYC	Supply audited financials, transaction docs, ref letter, collateral proof.	3–7 days
Bank Negotiation	We approach tier‑1 banks, finalize terms and collateral structures.	7–14 days
Issuance	Bank issues SBLC via MT760; we monitor for confirmation.	21 working days total

5. Why Financely?

• Direct access: Relationships with global banks reduce turnaround.
• Documentation clarity: We present clean files that banks can approve.
• Collateral optimization: We structure cash or insured backup to reduce costs.
• Price negotiation: Our scale means issuance fees are incisive.
• Swift execution: Fixed workflows built for speed, transparency and accountability.

6. Common Questions & Answers

What’s the minimum deal size?

Minimum issuance face value is USD 2 million; larger facilities up to USD 100 million, including syndicated or co‑arranged deals.

Can the SBLC be extended?

Yes. We include extension provisions in the facility agreement. Typically renew every 90 or 180 days based on performance and tenor.

Do I need cash margin?

Yes, standard practice requires 100% margin or partial collateral (30–50%) with bank‑recognized credit insurance or a comfort letter.

Can we use SBLC for multiple shipments?

Absolutely. Revolving SBLC structures allow you to draw, repay, and redraw over multiple trade cycles—subject to agreement.

What happens if the beneficiary draws?

If the beneficiary calls on the SBLC (per MT760), bank pays immediately. You must reimburse on demand and collateral is used to cover payment.

How do you reduce SBLC costs?

Maximize collateral, keep clean documentation, use credit insurance, optimize tenor and negotiate fees—Financely does all these for you.

7. Sample Pricing Snapshot

SBLC Size	Issuance Fee	Arrangement Fee	Est. Legal & SWIFT
USD 5 m	2.5% p.a.	2.0%	≈ USD 5,000
USD 20 m	3.0% p.a.	2.5%	≈ USD 6,500
USD 50 m+	Custom, ~2.0–3.5%	3.0%	≈ USD 8,000+

Financely Group arranges Standby Letters of Credit issued by regulated banks. We do not take deposits or pay beneficiary claims directly. Services depend on bank credit approval, collateral, and compliance with UCP/ISP, KYC, and AML rules. Misrepresentation or omissions terminate the mandate and may trigger regulatory action.