Standby Letters of Credit for Commodity Transactions
Standby Letters of Credit for Commodity Transactions
1. Why Traders Reach for SBLCs
Copper, crude, coffee – whatever is in the hold, sellers want airtight payment cover before a single ton leaves the dock. A standby letter of credit (SBLC) supplies that certainty. It is a bank’s promise to pay if the buyer flakes, which keeps cargo moving instead of gathering dust while lawyers argue. When razor-thin margins can evaporate overnight, an SBLC is the lifeline that keeps counterparties trading.
2. Our Arrangement Playbook
Financely acts as arranger, aligning your trade flow with banks eager for short-tenor, self-liquidating paper. We sit between issuing and confirming banks so you are not stuck translating bank-speak. Here is the drill:
- Rapid Pre-Screen – Cargo specs, route, buyer credit file, and draft contract hit our portal for a 24-hour yes or no.
- Mandate Letter – You sign, we lock the advisory retainer, KYC kicks off on every name in the chain.
- Diligence – Purchase agreements, warehouse receipts, vessel tracking, and sanctions checks – no nasty surprises in week three.
- Structuring – Face value, expiry, governing law, and rules (ISP98 or UCP600) nailed down; draft form circulates to all banks.
- Pricing and Term Sheet – Costs fixed, conditions precedent spelled out, issuance slot booked on the trade desk.
- Issuance – Applicant settles fees, the SBLC fires over Swift, seller loads the vessel, job done.
- Monitoring and Rollovers – If dates slip or partial draws happen, we manage amendments so the credit never lapses.
3. Ball-Park Economics
- Advisory Retainer: USD 40 000 – 100 000 due at mandate.
- Success Fee: 2.0 % – 4.0 % of SBLC face value, payable on Swift issuance.
- Issuing Bank Fee: 0.75 % – 1.25 % per annum, billed quarterly in advance.
- Confirming Bank Fee(when required): 0.25 % – 0.50 % per annum.
- Drawn Interest(if the SBLC is called and turns into a loan): SOFR + 3.00 % until repaid.
- Minimum Face Value: USD 2 000 000 per transaction.
Numbers tighten for blue-chip buyers or repeat flows and widen for frontier routes or spot deals with wild price swings. Every basis point matters – we grind for the best.
4. Deal Killers We See Weekly
- Buyer credit file missing audited statements – issuing bank walks.
- Cargo insurance excludes piracy on Gulf of Aden runs – confirming bank demands a premium nobody wants to pay.
- Shipment schedule longer than SBLC expiry – seller refuses to load.
- Force-majeure clause so wide it scares insurers – policy void, banks pull the plug.
Need an SBLC that clears compliance and keeps your cargo moving? Upload the trade pack and our desk will build a credit structure your counterparty will sign.
Talk to the Trade DeskFinancely Group arranges standby letters of credit and related trade-finance instruments. We are not a deposit-taking bank and we do not lend on our balance sheet. All mandates require full KYC, sanctions screening, and an advisory retainer. Final issuance, pricing, and confirmation remain subject to bank approval, documentation, and compliance with trade regulations. Minimum ticket size is USD 2 000 000. Misrepresentation triggers immediate termination and reporting under AML and CTF rules. SBLCs are contingent liabilities; if a drawing occurs, the applicant is fully responsible for repayment together with interest and fees.
Get Started With Us
Submit Your Deal & Receive a Proposal Within 1-3 Working Days
Submit your deal using our secure intake form, and receive a quote within 1-3 business days. Existing clients can connect with their relationship manager through our secure web portal.
All submissions are
promptly reviewed, and all communications are conducted through the intake form or the client portal for a seamless and secure process.
Thank you for considering working with us. A nominal fee of US$500 is required upon completion of each form. This fee covers the time and effort we invest in reviewing your submission and crafting a thorough proposal. We receive numerous inquiries and prioritize those that carry this fee, ensuring serious applicants receive prompt attention.
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