SBLC Collateral Guarantee Case Studies
Here are representative case structures that show how a third party collateral provider backs an SBLC so a bank will issue. Each example focuses on the commercial need, the control stack, the fee logic, and the timeline to MT760. If you are ready to request underwriting, move to the core service page Third Party Collateral Guarantee for SBLC Issuance. No em dashes are used in this document.
Snapshot:
Common use cases include EPC performance standbys, trade payment SBLCs, advance payment guarantees, earnout standbys in M and A, and concession compliance. The pattern is constant. Clean contract, ISP98 text with objective evidence, funded collateral at issuer, applicant indemnity and security, escrow and account control, four to six week cycle.
Case 1. EPC Performance SBLC for Public Works
Need |
Contract award requires a performance standby equal to 10 percent of contract value |
Size And Tenor |
USD 5 million, 12 months with milestone step downs at 30, 60, and 90 percent completion |
Controls |
ISP98 text, engineer certificates required for draw, escrow for advance payments, account control for progress payments |
Applicant Package |
Indemnity, share pledge of project SPV, assignment of receivables, 20 percent cash margin |
Outcome |
MT760 issued in week 5, exposure steps down on certified milestones, collateral released at expiry |
Case 2. Trade Payment SBLC for Cross Border Supply
Need |
Supplier requires standby to ship copper cathodes on 90 day terms |
Size And Tenor |
USD 10 million, 6 months revolving within a shipment cap |
Controls |
ISP98 text tied to shipment documents, escrow for buyer payments, assignment of proceeds from end buyer |
Applicant Package |
Indemnity, charge over inventory in transit, 15 percent margin, hedging plan for FX |
Outcome |
MT760 issued in week 4, supplier ships on schedule, standby rolls monthly against proof of delivery |
Case 3. Advance Payment Guarantee for Equipment Prepayment
Need |
Buyer pays 30 percent deposit and requires a standby to protect prepayment |
Size And Tenor |
EUR 3 million, 9 months through factory acceptance test |
Controls |
Draw requires evidence of non delivery by a set date, escrow holds deposit until production milestones, account control on release |
Applicant Package |
Indemnity by manufacturer, assignment of OEM receivables, 25 percent margin by applicant |
Outcome |
Standby issued in week 5, escrow releases in tranches on inspection certificates, standby canceled at test acceptance |
Case 4. M and A Earnout Standby
Need |
Seller requires security for deferred consideration tied to EBITDA targets |
Size And Tenor |
USD 8 million, 18 months with quarterly test dates |
Controls |
Draws require audited statements and independent accountant certification, escrow for scheduled earnout payments, account control on buyer account |
Applicant Package |
Indemnity by acquirer HoldCo, pledge of acquired company shares, negative pledge on leakages, 10 percent margin |
Outcome |
MT760 issued in week 6, seller receives payments from escrow on schedule, standby lapses after audit sign off |
Case 5. Concession Compliance SBLC
Need |
Ministry requires a standby to secure environmental and social obligations for a port concession |
Size And Tenor |
USD 15 million, 24 months with annual review |
Controls |
Draws require regulator certificate of non compliance, escrow holds remediation funds, account control for concession fees |
Applicant Package |
Indemnity, pledge over concession SPV shares, assignment of fee revenues, 25 percent margin |
Outcome |
Issuance in week 6, regulator accepts format, concession remains in good standing, collateral released on renewal with clean record |
Why These Structures Get Approved
- Objective draw conditions under ISP98 keep calls predictable and documentary.
- Funded collateral at the issuer covers first loss and satisfies the bank.
- Applicant indemnity and security create recourse and align incentives.
- Escrow and account control prevent diversion and support audit trails.
- Step downs reduce exposure as milestones are completed or as invoices settle.
Fee Logic And Timing
Item |
Typical Range Or Note |
Upfront Premium |
3 to 7 percent of SBLC face based on risk and tenor |
Annual Fee On Renewal |
2 to 3 percent while outstanding |
Applicant Margin |
10 to 40 percent cash or security depending on profile |
Timeline |
Four to six weeks with clean KYC, contract proof, and beneficiary readiness |
FAQ
Are these case studies anonymized
Yes. They reflect common structures and controls. Specific names and banks are not disclosed. The mechanics and documents are the same in live transactions.
Which rules are used for drafting
ISP98 by default. UCP600 can be used if required. The goal is objective evidence and predictable draws.
Can I combine an SBLC with insurance
Yes where the contract supports it. Performance bond or credit insurance can reimburse compliant calls subject to policy terms and waiting periods.
Financely structures, underwrites, and coordinates issuances with banks and investors through regulated partners. We do not issue letters of credit. Nothing here is a commitment to lend or invest. All transactions are subject to KYC, AML, sanctions screening, contract verification, and bank approvals. Terms and timelines vary by jurisdiction and counterparty readiness.