Many buyers, traders and project sponsors are told that the only way to obtain a standby letter of credit is to lodge a cash deposit equal to 100 percent of the face value. That approach ties up working capital and often kills the economic logic of the transaction. In reality, genuine SBLC issuance is a credit decision. Banks and credit providers look at the underlying business, collateral and support. Full cash margin is one option, not the only one.
An SBLC is a contingent liability. The issuer assumes that it may need to pay on demand and recover later from the applicant. That means credit analysis, not just document processing. The same disciplines that apply to term loans and revolving facilities apply here, with emphasis on worst case outcomes.
Margin still matters, but it does not always need to be a simple one for one cash pledge. The table below sets out common structures that can support SBLC issuance with lower cash collateral, provided credit quality and documentation are strong enough.
| Structure | How It Works | Typical Margin Or Coverage |
|---|---|---|
| Unsecured Corporate Limit | SBLCs are issued under a global facility for a strong corporate or group, alongside loans and other products. The bank relies on balance sheet strength, cash flows and covenants instead of specific collateral for each standby. | No separate cash margin. Overall headroom and pricing reflect the group rating and relationship. |
| Partial Cash Margin Plus Guarantee | Part of the SBLC face value is secured by a cash deposit, with the remainder supported by a parent or sponsor guarantee and financial covenants. | Cash margin often in the 10 to 40 percent range, adjusted for credit quality and purpose of the standby. |
| Asset Based SBLC Facility | The SBLC is issued under a borrowing base or asset based facility, where receivables, inventory or other collateral are monitored. The bank advances up to a percentage of eligible assets and uses the SBLC as one form of utilisation. | Economic coverage well below 100 percent cash, but controlled through advance rates and regular reporting. |
| Counter Guarantee / Fronting Structure | A local bank issues the SBLC to the beneficiary, backed by a counter guarantee from an international bank that relies on the client relationship. Margin may sit partly with the local bank and partly with the relationship bank. | Combined security and margin reflect both banks' risk assessments, often below a 100 percent cash pledge at group level. |
| Insurance Or Risk Participation Support | The issuing bank shares risk with a credit insurer or a participant. This can increase appetite and reduce internal capital usage, which in turn can support more flexible margin terms for the applicant. | Cash margin depends on underwriting, but shared risk can reduce pressure for full collateralisation. |
| Securities Pledge Instead Of Cash | Marketable securities are pledged in a custody account, with advance rates applied to their value. Margin calls apply if prices move. | Advance rates commonly below 100 percent, depending on liquidity and credit quality of the portfolio. |
The percentages are indicative. The point is that the bank is protected through a mix of collateral, guarantees and contract quality, not just a locked cash deposit equal to the face value.
Marketing for fake or non bank SBLC schemes often exploits frustration with cash margin requirements. The promise is simple: large face amounts, no collateral, no financials and quick issuance against an upfront fee. That story does not match how regulated SBLC issuance works.
Financely works with applicants who treat SBLCs as part of a broader credit strategy rather than as a shortcut to unsecured funding. That means aligning the standby with real trade obligations, project documents or financial covenants, and presenting lenders with a clear view of cash flows, collateral and support. We do not arrange leased instruments or schemes that promise large standbys with no underwriting and no security.
Our role is to help sponsors and operating companies understand what profile and structure will be credible for SBLC issuance, prepare files to that standard and connect them with banks and credit providers through regulated partners. All mandates are handled on a best efforts basis, with emphasis on transparency around terms, collateral and fees.
For an overview of how we review transactions, structure facilities and engage with lenders on SBLC and related trade finance requests, visit our process page and walk through each step.
Learn More About Our ProcessDisclaimer: This page is for general information only and does not constitute legal, tax, accounting or investment advice. Financely acts as advisor and arranger through regulated partners and is not a bank. Any SBLC, guarantee or financing structure is subject to underwriting, KYC, AML, sanctions screening, legal review, documentation, perfected security and approvals by relevant stakeholders. No public offer or solicitation is made on this page.
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Disclaimer: Financely provides financing based on due diligence and feasibility. Approval is not guaranteed, and past performance does not predict future outcomes. All terms are subject to review. Financely primarily assists with structuring and distribution. Qualified parties carry out the project if the client approves the proposal.
Financely advises growth-focused businesses on accessing capital by introducing their opportunities to professional investors. Financely is not a securities broker or dealer. Where appropriate, engagements are coordinated with regulated broker-dealers, investment banks, legal counsel, and other specialists.
Financely does not solicit, offer, or accept orders to buy or sell securities and makes no assurance regarding capital-raising outcomes.
Services are strictly business-to-business. Financely does not provide personal finance, consumer credit, or retail advisory services.
Advisory services are reserved for post-revenue companies that recognize the time and resources required for professional underwriting.
All mandates start with an RFQ. We review submissions, issue a brief Go/No-Go memo, and where bankable, release a Term Sheet that leads to funding. We arrange capital across Senior Secured, Unitranche, Second Lien/Mezzanine, Preferred Equity, and Gap Solutions. We do not process deals by email or chat.
Letters of Credit, Standby LCs, Confirmations, Receivables Finance, and Inventory Lines with control.
Funding arranged for trade flows with instruments sized to your cycle and aligned to delivery and settlement.
Move forward to secure working capital and keep goods moving. Submit the RFQ to start underwriting for funding.
Limited or non-recourse structures for energy and infrastructure with lender-ready materials.
Funding solutions aligned to project cash flows with credible covenants and conditions to reach notice to proceed.
Advance the file to termable status. Submit the RFQ so we can underwrite and secure funding.
Debt and Preferred solutions anchored on cash flow, Quality of Earnings, and clear closing mechanics.
Funding across senior, unitranche, and preferred to match stable cash flows and acquisition timelines.
Get financed on workable terms for closing. Submit the RFQ to start underwriting.
Acquisition, development, bridge, and refinance with lender-ready packs and third-party reports managed.
Funding calibrated to DSCR, leverage, and tenancy with terms designed to close.
Move to a financeable package. Submit the RFQ to initiate underwriting for funding.
KYC and Source of Funds required. Engagements are best-efforts and subject to underwriting. Preference for operating companies with meaningful revenue. See our FAQ and Procedure.
Financely Inc. (“Financely”) provides corporate-finance advice and is wholly owned by Aurora Bay Trust, a trust formed under Bahamian law, together with its authorized affiliates. Depending on deal structure, jurisdiction, and local rules, engagements may be carried out through Financely Group LLC, a non-deposit-taking, non-banking financial company; Ashford Capital Advisory LLC; or another related entity.
Financely and its affiliates are not registered as securities broker-dealers and do not execute securities transactions or hold client funds or securities. When a mandate involves the purchase or sale of securities and a registered intermediary is required, any orders are introduced to and executed by one or more independent U.S. broker-dealers registered with the SEC and FINRA. Those broker-dealers are solely responsible for trade execution, custody, and related regulatory obligations. Nothing in this material constitutes an offer, solicitation, or recommendation to buy or sell any security or to engage in any specific transaction. Before engaging Financely Group LLC, Ashford Capital Advisory LLC, or any affiliate, you are responsible for confirming that such engagement complies with your own legal, regulatory, tax, and other requirements. In the United States, certain advisory activities may be conducted in reliance on exemptions available under the Investment Advisers Act of 1940, including the “foreign private adviser” exemption where applicable. Our services and regulatory status may vary by jurisdiction and by transaction type.
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