About Financial Instruments Funding Options
Who are we : We are a South African financing solutions brokerage that sources and secures Bank Guarantees (MT 760), Documentary Letters of Credit (DLC)(LC), Standby Letters of Credit (SBLC), Revolving Letters of Credit, Transferable Letters of Credit, Credit Facility and Lines of Credit using the MT760 bank guarantee.
Other types of guarantees such as Construction Bonds, Performance Bonds, Bid Guarantees, Retention Bonds, Construction Insurance and Custom Guarantees and related products, are also available from our principals. Click Here to find out more about these Bonds.
- Minimum Term – 3 months
- Maximum Term – 12 months
- Minimum APR – 13 %
- Maximum APR – 30 %
- Loan R 1 million
- Term R 1 year
- APR 13 %
- Repayment R 1 130 000
Subject to lenders Terms and Conditions at time of quote.
What do we charge
Some of the financial instruments have no upfront fees but some like the MT760, the LC and SBLC will have an Administration Fee and Instrument Fee. We will advise you of the costs, BEFORE securing the financial instrument. Our initial consultation is free but once we are instructed to proceed then professionals such as attorneys are used and then fees are applicable. Fees for specific products can be lodged with your own attorney or bank until they are needed. We only need proof that you have the fees available to pay before we do the work of establishing the financial instrument.
Why do I have to pay this at time of issue
International service providers require BG, LC and SBLC fees before the financial instrument is issued. We need to cover all these costs and so fees need to be available when called for, to avoid penalties. Please bear in mind that with all instruments issued, we do not profit from the deal itself, you do.
Why use us
We know the various players in the market and will ensure you get a valid and credible financial instrument. We simplify an otherwise complicated process.
Should I not use my own bank for this
By using our service providers you do not necessarily use your own credit facility at your bank, you use our credit providers credit lines via your bank. This is very useful if you are at your bank limit or they will not assist you. We use the top 100 world banks to issue the financial instruments. It is important that the instrument issued is backed by a world class bank.
What size financial instruments can be issued
Almost unlimited, because these financial instruments are issued and backed by the top 100 banks and insurance companies, in the world.
How long to set up
On average, not longer than two weeks after we have received all the information we request.
Simply put, a Bank Guarantee is a commitment by a bank or the issuing party to pay a set amount of money to a nominated beneficiary, as compensation, in the event of a default by the client.
Where are BG’s used for?
Construction and development, expanding companies, trading platforms and the establishment of trading facilities.
What is needed to assess?
Each product has a different requirement but typical documents are : Business plan, feasibility study, CV’s, cash flows, budgets, QS reports, exit strategy, funds already invested, property valuations, asset valuations and clients personal and company balance sheets, proof of funds to pay admin fee and BG costs. Full lists for each different type of BG are available from us.
Some features of BG’s :
- Can be used to enhance your ability to secure a credit facility, especially if it is 100 % cash-backed (Cash backed is when someone has blocked funds in their account, to allow issue of the BG).
- Can be used as added security / collateral for a loan
- Can be issued for 3 months to up to 5 years
- Certain BG’s can be monetised. You need to verify this prior to issue. Your bank may charge a fee to “monetise” the Bank Guarantee.
- Fees cannot be paid from the trade profits. The instrument fees are always payable when the instrument is issued. Costs and rates vary BUT in many cases this is cheaper than other forms of credit and the big advantage of this instrument, is that if you have a credible trade proposal, you can access a large trade facility with a fee which is relatively small in relation to the trade benefit to you.
To raise a Bank Guarantee, for trade or project purposes the following requirments need to be met:
You need to demonstrate that the project / transaction has a good chance of success.
Must be available, that accepts the BG as collateral / equity.(We can arrange this)
You need to be able to pay the Admin Fee and the Instrument Fee
Repayment of the bank loan at the end of the project must be plausible (unless it is grant funding)
The BG must be more than R 10 million
View An Example
Securing a Trading Facility Using a Bank Guarantee
Our Bank Guarantee associates are able to set up a facility on your behalf, out of which you may issue financial instruments (Letters of Credit) to your suppliers as and when required. The facility will be with your local bank. To set up this facility a full feasibility proposal needs to be sent to the relevant bank. Our associates are able to provide these types of facilities and instruments, as they have suppliers of BG’s in Europe, who will avail securities to the local bank in order for a trade facility to be structured, on your behalf.
This is all credible, as local attorneys draw up an agreement confirming what the service providers duties and responsibilities are in setting the facility set up for you. Only once the service level agreement is agreed to by you and signed will the work commence.
Once the facility is set up, you will be in a position to issue Guarantees, Standby Letters of Credit and Letters of Credit to your suppliers, which provides them with the payment undertakings and security they need to trade with you. Please bear in mind that these financial instruments will be issued out of your facility at a local or international bank.
The following is required in order to commence with the establishment of a trade facility :
An administration fee of ZAR 35 000 in order to commence negotiations with our providers, to pay them to block certain instruments and to arrange the agreement from the appointed attorney on the undertakings with respect to establishment of a trading facility for you.
A presentation fee of ZAR 200 000 to be lodged in a nominated attorneys trust account (yours or ours), for purposes of producing a feasibility study, business plan and to do the presentations to the banks to secure a trade facility. The agreement mentioned above, governs the process, milestones, deliverables and the responsibilities, to you.
SBLC – Standby Letter of Credit
An SBLC is a Bank Guarantee and is not the same as a traditional Documentary Letter of Credit, which is used for international trading purposes. A Standby Letter of Credit is also referred to as a BG. The Swift code for a BG is MT760.
Certain BG’s (and SBLC’s) can be used to enhance your ability to apply for a line of credit or trade facility with your bank and can assist in offering your bank or a lender additional collateral. Our service providers offer 100% cash-backed BG’s and SBLC’s using blocked funds on your behalf and so most banks can use these as additional collateral.
These are issued out of the top 100 World Banks – mainly from Europe, like HSBC, Deutsche, UBS etc for 6 months to 5 years and transferred to your bank via SWIFT protocol MT760.
By using the right issuing bank, you are assured of world wide acceptance of your BG and SBLC.
Leasing of a BG’s and SBLC’s comes at a high cost but in most instances the benefits of using these instruments, far outweigh the costs of setting them up. We will quote you rates and costs prior to entering into any financial transaction.
Why use us for BG’s and SBLC’s : Because our service providers issue out of highly accredited, international banks, making your instrument a tangible instrument.
Documentary Letter of Credit (DLC)
A DLC is a commitment by a bank, at the request of an importer, to pay money to the exporter, when he presents a set of documents at a nominated bank, that comply with the terms of the Letter of Credit and within a certain time period.
These are undertakings conducted through international banks, provide a form of guaranteed payment (if all conditions are met) and are based solely on the documents and not on the merchandise or service provided.
Can brokers / middlemen use us
Yes, most definitely. In fact most of our clients are people that were turned down by their own banks and we were able to offer trade finance using our financial instruments.
Why use our LC facilities
So that your own line of credit at your own bank is not used or where your own bank will not provide the facility to you (for whatever reason). Our specialists can provide the trading platform and trade facility for you to conduct that export or import business. Use our specialists’ facilities to expand your trading business.
Types of LC’s
- Standby – can be drawn against, only on default of a service or financial obligation. It is a guarantee of payment ”upon first demand” to secure good performance of a contract or obligation.
- Revocable – can be revoked if not indicated as Irrevocable
- Unconfirmed – bears only the obligation of the issuing banks and so the beneficiary cannot look to the intermediary for credit worthiness
- Confirmed – a second obligation by another bank, is added to the LC.
- Sight v Usuance – Payment is made without delay, if at “Sight” and if a Usuance LC, then payment is to be made at a future prescribed date.
- Transferability : The beneficiary (in many cases a middleman) can transfer the LC rights to the another party if the LC is transferable.
Let us simplify your trade processes using third party LC’s for Purchase Order bridging, exports, imports and trade finance.