Letter of Credit Discounting Term Sheet for DLC & SBLC

Letter of Credit Discounting Facility — Indicative Term Sheet

Indicative only. Subject to diligence, legal documentation, KYC, AML, sanctions screening, capacity, and lender approvals. Financely acts as arranger through regulated counterparties. Financely is not a lender. This is not a commitment to fund.
This facility converts compliant Letter of Credit presentations into working capital across multiple formats. Coverage includes Documentary Letters of Credit, UPAS Letters of Credit, and Standby Letters of Credit where discounting is permitted by the governing rules and by the instrument text.
  • Liquidity against UCP 600 DLCs, UPAS structures, and ISP98 SBLCs where drawable or assignable
  • Program sized to your pipeline, issuing bank quality, and jurisdictions
  • Optional SPV purchaser for true sale and clean reporting
  • Controlled flows for originals, electronic presentation, and proceeds

Key Terms

Facility and Parties Letter of Credit Discounting Facility. Arranger: Financely Group. Funder: regulated bank or private credit fund sourced by Financely. Client: exporter, seller, or beneficiary. Optional Purchaser SPV for true sale of drafts and assigned proceeds.
Program Size Up to USD 25,000,000 revolving. Single draw minimum USD 250,000. Single obligor exposure cap 20 percent of program. Country and bank sublimits apply.
Eligible Instruments DLCs governed by UCP 600, sight or usance up to 180 days. UPAS LCs with confirmed or accepted deferred reimbursement, funding at sight against deferred payment obligation. SBLCs governed by ISP98 where a complying presentation or assignment of proceeds permits discounting. eUCP 2.0 presentations accepted where permitted. Payable in USD, EUR, or GBP. Freely negotiable or restricted to the funder or its agent. Confirmed instruments may qualify for non recourse.
Counterparty Criteria Issuing, confirming, paying, and reimbursing banks must be acceptable to the funder based on rating, jurisdiction, sanctions, operational track record, and documentary practices. High risk and sanctioned countries are excluded. Concentration limits and stop funding triggers apply.
Advance Rate DLC sight up to 92 percent of face for compliant presentations. DLC usance up to 90 percent. UPAS up to 93 percent against accepted deferred obligation from an acceptable bank. SBLC drawings up to 85 to 90 percent where the draw is unconditional and bank risk is acceptable. Retainage released at reimbursement net of accrued discount and fees.
Tenor Sight or up to 180 days usance. Longer UPAS tenors considered with confirmation or insurance. SBLC drawings discounted to expected reimbursement date as permitted by the instrument and rules.
Pricing USD draws price at CME Term SOFR plus 3.00 to 6.00 percent per annum. EUR draws price at 3 month EURIBOR plus 3.00 to 6.00 percent per annum. GBP draws price at SONIA plus 3.00 to 6.00 percent per annum. Day count actual over 360. Minimum charged days for sight 30 days. Usance minimum greater of 30 days or 5 days past maturity. Handling fee USD 250 per discounted instrument. SWIFT, courier, and confirming bank fees for client account at cost.
Recourse Full recourse to the client until reimbursement is received in cleared funds. Non recourse may be offered for confirmed DLCs or UPAS obligations from acceptable banks, or where credit insurance is in place and documents are strictly compliant. SBLC discounting is typically with recourse unless confirmed and drawable without defenses.
Security and Controls Assignment of proceeds and drafts. Control over originals and electronic presentations. Proceeds to a pledged collection account. For SPV option, true sale of drafts and assigned proceeds to the SPV with account control. No double assignment. Negative pledge on discounted proceeds. Concentration and eligibility tests monitored monthly.
Use of Proceeds Working capital, supplier payments, freight, insurance, and operating costs linked to the underlying trade or obligation.
Documentation Discounting agreement, assignment of proceeds, notice to issuing or confirming bank, account control agreement, fee letters, and where elected SPV sale and servicing agreement. Tested SWIFT acknowledgments. Legal opinions if required by the funder. Insurance endorsements if used.
Core Covenants Maintain good standing and authorizations. Present only compliant documents. No other assignments of the same proceeds. Notify the funder of disputes, set off claims, stop payment notices, or sanctions issues. Provide monthly pipeline and exposure reports. Keep taxes and duties current. Observe limits and eligibility rules. Maintain required confirmations or insurance where non recourse is offered.
Conditions Precedent Completed KYC and AML. Corporate approvals and specimen signatures. Sample LC set and draft document pack. Collection account opened and controlled. Confirming bank lined up where required. Insurance binders where used. All fees funded. No material adverse change. Sanctions clearance on all parties and goods where applicable.
Governing Rules and Law DLC presentations under UCP 600 and eUCP 2.0 where used. UPAS reimbursement obligations as per LC text and UCP 600. SBLCs under ISP98. Collections under URC 522 where applicable. Facility documents under English law with exclusive jurisdiction of the courts of England and Wales unless the funder requires New York law.

Arranger Fees and Costs

Retainer: USD 75,000 on engagement. Covers structuring, underwriting, term sheet negotiation, documentary review, and distribution to funders.

Success Fee: 2.50 percent of funded amounts at first draw. For upsizes, fee applies to the incremental commitment.

Third Party Costs: Legal, KYC, confirming bank, custody, SWIFT, courier, and due diligence reports. Payable by the client at cost or from first proceeds.

SPV Purchaser Structure

Purpose: Achieve true sale of drafts and assigned proceeds, ring fence risk, and support larger program sizes with investors that require a purchaser vehicle.

  • Jurisdiction: England, Ireland, or Luxembourg as preferred funder jurisdictions
  • Assets: purchased drafts, assigned LC or SBLC proceeds, and related rights
  • Accounts: dedicated collection account under control agreement with the funder or security agent
  • Documents: sale and servicing agreement, notice of assignment, performance undertakings, and priority filings where needed
  • Governance: independent director service and company secretarial support as required

Closing Procedure and Timeline

  1. Execute the engagement with Financely and fund the retainer
  2. Provide KYC, corporate approvals, financials, trade pipeline, sample DLCs, UPAS texts, and SBLC forms
  3. Underwriting and distribution to funders with a credit note and data room
  4. Select a preferred term sheet and agree limits, pricing, advance rates, and controls
  5. Open a controlled collection account and set tested SWIFT flows with the funder
  6. Form the SPV if elected and execute the sale and servicing agreement
  7. Execute the discounting agreement, assignments, fee letters, and deliver legal opinions if required
  8. Satisfy conditions precedent including sanctions clearance and, where needed, confirmations or insurance binders
  9. Present the first compliant draw and receive the advance to the agreed account

Typical timing is 2 to 4 weeks with complete materials and pre cleared banks.

FAQ

Which instruments qualify? Irrevocable UCP 600 DLCs, UPAS LCs with a deferred reimbursement obligation, and ISP98 SBLCs where the text allows assignment of proceeds or discounting of a complying presentation from acceptable banks.

Is non recourse available? Yes for confirmed DLCs and UPAS obligations from acceptable banks or where credit insurance is in place and documents are strictly compliant. SBLC discounting is usually with recourse unless confirmed and drawable without defenses.

How does UPAS discounting work? The funder advances at sight against the issuing or confirming bank deferred payment obligation. The bank repays at the deferred date. Interest covers the deferral period.

Can you fund before acceptance? Early funding is considered once originals or eUCP data sets are controlled, shipment is evidenced, and the issuing or confirming bank has acknowledged the presentation. Minimum charged days still apply.

What documents are required? The LC or SBLC, compliant transport and commercial documents, accepted draft where applicable, assignment or proceeds notice, tested SWIFT acknowledgments, and the funder forms. Electronic presentation is accepted where the instrument permits.

What happens if the issuing bank delays payment? Interest continues until actual reimbursement. If payment fails, the client must repay the advance and costs under the recourse terms.

Why set up an SPV? To achieve true sale accounting, isolate performance and legal risk, and support larger program sizes with investors that require a purchaser vehicle with controlled accounts and independent governance.

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