How to Get POF SBLC

Can You Afford POF SBLC?

POF SBLCProof of Funds Standby Letter of Credit is often required in import/export trade transactions. It is also useful when seeking bank instrument collateral for project and trade finance, leveraging your position to buy and sell bank instruments along with other credit enhancement situations.

The conventional way to buy an SBLC for proof of funds is to approach an institutional bank or security brokerage with whom you may already have a relationship with. You will need considerable assets, history in good standing with the bank, and general credit worthiness in order to be successful.

The Lease POF SBLC Advantage

Asset holders with lines of credit and cash assets have at their disposal the ability to facilitate borrowers to close their transactions without going through the traditional banking steps. Borrowing funds from proof of funds providers enables people to get access to capital much easier than borrowing even from private hard money lenders. No collateral is required and very little underwriting is necessary.

The POF SBLC Process is Faster

Also referred to as a lease funds arrangement a lease proof of funds can close in a matter of days as opposed to weeks and months on transactions of great magnitude. The process is shorter compared to what banks typically require clients with little transactional history with an SBLC.

POF SBLC Compliance

The POF SBLC provider requires the client go through normal banking to set up a bank account with full disclosure of personal and corporate identity, a background check is completed to ensure there is no criminal history.

Upon engagement with a new POF SBLC transaction the asset holder and their attorneys, bankers, and compliance officers seeks to ensure the use of funds is not be for illicit purposes and abides generally accepted business practices.

POF SBLC Requirements

The proof of funds provider wants to make sure the client has the fee money currently available to use for the lease SBLC. They shy away from clients that have no personal capital of their own who hope a bank undertaking by bank promissory note, commonly called an Irrevocable Conditional Pay Order (ICPO), will pay for the lease fees after the instrument is delivered and financed. Most providers use this requirement as a vetting tool to ensure they are working with sophisticated clients. Others have found ICPO transactions have low success rates with lease funds and borrowed bank instruments. (See Procedures)

As another requirement, the POF SBLC provider wants to ensure that their asset is going to return at the end of the borrower agreement without any liens, attachments, restrictions, or encumbrances. To do this they often require the borrower provide from the beneficiary a bank undertaking aval to return the SBLC prior to the expiration of the lease, or otherwise the borrower may extend the contract.

POF SBLC Issuance and Delivery

Balboa Trade provides POF SBLC issuances with first a pre-advice SWIFT MT799 and then a SWIFT MT760 full bank to bank delivery. However, not all SBLC transactions need to be issued by SWIFT. The borrower may also elect to use other generally accepted bank to bank documentary evidence of issuing the bank instrument.

When dealing with a leased standby letter of credit it is not customary for the issuer to deliver the bank instrument through DTC, Euroclear, Clearstream or other clearing houses. Such delivery is reserved for equity purchases, such as in buy/sell transactions. The asset holder stands too much risk and lessens the possibility of getting the instrument returned on time according to the loan agreement.

Proceed to Procedures

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