SBLC Monetization: How Investors & Companies Unlock Liquidity

Standby letters of credit are usually treated as static guarantees that sit behind trade, projects or contracts. They protect counterparties, signal credit strength and only come into focus if something goes wrong. In many cases, that support is valuable, but it also means a sizeable commitment sits on the sidelines while the business still has funding needs.

SBLC monetization turns that unused capacity into liquidity. Instead of leaving a standby in place only as a backstop, qualified holders can use it as collateral to access short-term funding for working capital, acquisitions or project costs, subject to credit approval and legal structuring.

This guide explains what SBLC monetization is, how it works in practice, who it suits and how Financely Group helps clients structure safe, bank-grade solutions through regulated lenders rather than informal arrangements.

What Is SBLC Monetization?

SBLC monetization is a financing arrangement where a lender advances funds against a valid standby letter of credit. The SBLC is pledged as collateral and remains in force, but its presence allows the borrower to draw a percentage of its face value as a credit facility or loan.

Key characteristics of credible SBLC monetization structures include:

• The SBLC is issued by a recognised bank under rules such as ISP98 or UCP 600.
• The facility is documented as a secured loan or credit line, not as a sale of the SBLC.
• Use of proceeds is clearly tied to projects, working capital, trade flows or investment plans.
• Repayment and security terms are agreed up front, with clear rights and obligations for all parties.

In short, the SBLC remains a guarantee in favour of a beneficiary, while a lender uses its presence as comfort to extend separate funding to the SBLC applicant or a related entity.

How SBLC Monetization Works

While each lender has its own procedures, most SBLC monetization deals follow a consistent sequence from initial review to funding and repayment.

1. Identify a Monetizable SBLC

The starting point is an existing or proposed SBLC that meets minimum criteria. It must be bank-issued, authentic, verifiable through SWIFT and acceptable from a legal and credit standpoint. The SBLC should have sufficient remaining tenor, usually at least 6 to 12 months, and a clear underlying purpose.

2. Approach a Lender or Credit Provider

The holder, applicant or their advisor approaches banks, private lenders or credit funds that handle SBLC-backed transactions. The lender reviews:

• The issuing bank and its rating.
• The applicant’s financial position and track record.
• The beneficiary and nature of the obligation being guaranteed.
• The wording of the SBLC, including drawdown conditions and expiry.

At this stage, the lender decides whether the SBLC is suitable as collateral for a facility and on what basis.

3. Valuation and Terms

If the SBLC is acceptable, the lender proposes monetization terms. These usually include:

• Advance rate, often in a range such as 80 to 95 percent of face value, depending on risk.
• Tenor of the facility, usually aligned with or shorter than the SBLC expiry.
• Pricing, including interest margin and any upfront or renewal fees.
• Security package, such as assignment of rights under the SBLC, pledges over accounts and in some cases additional guarantees.

The goal is to ensure that, if the SBLC is drawn or if the borrower fails to repay, the lender has a clear path to recover funds under the security structure.

4. Access to Funds

After documentation is agreed and security is perfected, the lender makes funds available. This can take the form of a one-off disbursement, a revolving credit line or tranches linked to project milestones. Proceeds are typically used for:

• Working capital and trade flows.
• Bridging project costs ahead of long-term financing.
• Acquisitions and capital expenditures.
• Other agreed corporate purposes.

5. Repayment and Completion

Repayment terms are defined in the facility agreement. Sources of repayment may include operating cash flow, project revenues, refinancing or defined asset sales. If repayment is made as agreed and there is no call on the SBLC, the facility matures and security over the SBLC is released.

If cash flow does not materialise as planned, the lender relies on the agreed security package, which can include applying proceeds from any SBLC drawings in line with the contractual waterfall.

Benefits of SBLC Monetization

1. Unlock Hidden Capital

Many companies treat SBLCs purely as contingent obligations. Monetization allows those same guarantees, when eligible, to support immediate funding rather than sitting unused in the background. That can be particularly useful where working capital is constrained but guarantee capacity is available.

2. Maintain Asset Ownership

SBLC monetization raises liquidity without forcing a sale of core assets or equity. The SBLC continues to perform its original risk mitigation function. The borrower gains access to credit while keeping ownership and control over the underlying project or business.

3. Faster Access to Liquidity

When a credible SBLC is in place, underwriting focuses less on uncollateralised risk and more on structural and documentation checks. That can support faster credit decisions than unsecured lending at the same size, especially when handled by lenders who specialise in structured SBLC-backed facilities.

4. Flexible Use of Proceeds

Subject to lender approval, monetised SBLC facilities can support a wide range of corporate needs. Examples include bridging project costs until permanent financing is arranged, funding trade cycles, supporting acquisitions and providing tactical liquidity during restructuring or expansion.

5. Potentially Lower Cost of Capital

Compared with pure equity raises or unsecured loans, a well-structured SBLC-backed facility can offer attractive pricing relative to risk. The lender has collateral support and clear recourse paths, which tends to be reflected in the economics, especially when the issuing bank and beneficiary are strong credits.

Who Can Benefit from SBLC Monetization?

SBLC monetization is relevant wherever sizeable standby capacity sits alongside legitimate funding needs. Typical users include:

• Corporates with SBLC-backed trade or project facilities: Companies that already arrange bank guarantees for performance, payment or debt service and want to use that profile to support additional liquidity.
• Project sponsors and developers: Energy, infrastructure and real estate sponsors with SBLCs in place for construction or off-take obligations who need bridge or working capital.
• Investors holding SBLC-backed positions: Investors that have exposure supported by SBLCs and wish to raise funding against those positions through recognised lenders.
• International traders: Traders using SBLCs for cross-border payment or performance undertakings who require additional working capital around those transactions.
• Businesses preparing for acquisitions or restructurings: Companies that want to fund transactions or reorganisation while maintaining existing bank guarantee structures.

Why Choose Financely Group for SBLC Monetization

The SBLC market is technical and driven by documentation details. Not every SBLC is suitable for monetization, and not every funding proposal matches regulatory and risk requirements. The challenge is finding serious counterparties with clear rules, rather than informal offers that do not withstand credit or legal review.

Financely Group works with clients that hold or can obtain genuine, bank-issued SBLCs and want to explore monetization as part of a wider funding strategy. Through regulated partners, we:

• Review SBLC drafts and executed copies for structure, tenor, issuing bank and rule set (such as ISP98 or UCP 600).
• Analyse the underlying transaction, project or corporate need to confirm whether SBLC-backed funding is appropriate.
• Introduce lenders and credit funds that are active in SBLC-secured facilities at the relevant ticket size and jurisdiction.
• Support term sheet negotiation on advance rates, pricing, covenants, security and permitted use of proceeds.
• Coordinate with counsel, banks and trade counterparties through to closing, so the SBLC structure and the monetization facility work together without conflict.

The aim is to deliver bankable, documented solutions where all parties understand the risk allocation and the SBLC continues to serve its original contractual function while supporting new liquidity.

Unlock Liquidity with SBLC Monetization Today

If your business or investment vehicle holds a credible SBLC and has near-term funding needs, monetization can be a practical way to raise capital without selling assets or diluting ownership. The key questions are whether the SBLC is eligible, what level of advance is realistic and how the facility will be repaid.

A structured approach, with the right lenders and advisers, turns the SBLC from a passive guarantee into a source of funding that supports real projects, trade flows and corporate plans while keeping risk under control.

SBLC Monetization: Common Questions

Disclaimer: This page is for general information only and does not constitute legal, tax, accounting or investment advice. Financely Group acts as advisor and arranger through regulated partners and is not a bank or direct lender. Any SBLC monetization, guarantee facility, trade finance, project finance or capital raising solution 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.