A lot of enquiries around standby letters of credit (SBLCs) start with the same hope: “We need a 10 to 100 million SBLC, we cannot pay anything up front, and we have no collateral. Can a third party issue or arrange it for free and get paid from the proceeds later?” The short answer is no. In real banking, there is no scenario where a serious institution issues an SBLC, posts margin, carries the risk, and charges nobody anything until a project magically produces cash.
If a structure like that existed at scale, every project sponsor on the planet would use it. They do not, because it does not exist. SBLCs are credit support instruments. Credit always comes with risk, and someone always pays for that risk through collateral, covenants, fees, interest, or equity dilution. Hoping for a large SBLC with no advance payment and no collateral is not just optimistic. It is detached from how balance sheets and risk committees work.
In normal corporate banking, an SBLC is issued for an existing client that has a credit line or is willing to post cash collateral. The bank assesses the client, assigns an internal rating, books the SBLC as a contingent liability, and allocates capital against the exposure. That balance sheet usage has a price. The bank charges an issuance or commission fee, plus documentation and sometimes legal fees, and may ask for cash margin or security over assets or receivables.
Even if you never see the word “advance payment”, you still pay. The bank may:
The key point is simple. Even in the best case, where you have a strong local relationship bank, audited accounts, and collateral, you still pay for the SBLC through fees and security. No bank issues a million or hundred million line, takes pure performance or payment risk on your behalf, and charges nothing. That would be a gift, not credit.
Once you admit that you do not have the required collateral or credit standing with your own bank, the nature of your request changes. You are not asking the market to “issue an SBLC”. You are asking someone else to put their balance sheet, cash, or securities on the line so that a bank can issue an SBLC in your favour. That third party is effectively a lender or equity investor, regardless of what label you put on them.
A third party that posts margin or backs an SBLC has to fund that position. They either tie up their own cash or draw on their own lines. That has a cost from day one. They then carry counterparty risk on you and project risk on whatever you want to do with the collateral. Expecting them to do all that with zero advance payment, no retainers, no commitment fees, and no security is the same as asking them to give you free money.
For a stranger to secure an SBLC for you without you putting anything down, all of the following would need to be true:
No professional credit investor behaves like that. The people who say they do usually want a large “due diligence” or “compliance” fee up front with no real SBLC at the end.
If you want another party to stand behind your SBLC, then you are doing a capital raise, not buying a banking product. In practice that means:
All of those paths involve underwriting, structuring work, legal documentation, and fees. There is no version where a serious party posts margin for your SBLC in silence and waits in the background hoping you succeed.
The marketing stories around free SBLCs repeat the same themes. Promoters claim they operate “private platforms” or “managed programs” that do not require collateral from the client. They talk about cash-backed instruments, top tier banks, and large ticket sizes. They say they only charge on success and occasionally ask for a “refundable” legal or compliance fee that somehow is not considered an advance payment.
In real life, one of three things happens. The SBLC never appears, and the client loses whatever upfront “non-advance” fees they paid. A small, weak bank issues a document that mainstream lenders will not accept. Or the structure turns out to be a regular loan or equity deal with heavy economics, but wrapped in SBLC language to make it sound more palatable. None of those outcomes match the original promise of large, clean, transferable SBLCs from top banks with no cost and no security.
If your goal is to support a trade flow or project with an SBLC in a credible way, the discussion has to move away from “no advance payment” and into real credit work. That starts with an honest view of your balance sheet and your track record. From there, you have a few realistic options.
None of these paths are free. They all involve cost of capital, documentation, and deal friction. The difference is that they are grounded in how regulated banks and credit investors actually operate, not in stories about shortcuts that do not exist.
Financely is approached every week by sponsors and intermediaries asking for “SBLCs with no advance payment” or “credit enhancement” with no collateral. We decline those requests. Our role is to structure and arrange transactions that can stand up in front of real risk committees, not to package wishful thinking for people who do not want to hear the word equity or retainer.
When we look at an SBLC-related transaction, we focus on:
If your only condition is “no advance payment, no collateral, no dilution”, there is nothing to arrange. If you are prepared to put something real on the table and face the cost of capital that comes with it, then there is a basis for a conversation.
If you want an honest read on whether an SBLC structure is viable for your company, our team can review your case and outline options that banks and credit funds may actually consider through our regulated partners.
Submit Your Transaction For ReviewDisclaimer: This page is for general information only and does not constitute advice, an offer, or a solicitation to buy or sell any financial product. References to SBLCs, guarantees, lenders, and market practice are high level and may not reflect the details of your situation. Financely acts as advisor and arranger through regulated partners and is not a bank or lender. Any facility, guarantee, or investment is subject to underwriting, KYC, AML, sanctions screening, legal review, perfected security, and approvals by relevant stakeholders. Professional and wholesale audience only.
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