| Collateralized SBLC | Unsecured SBLC |
| When dealing with most banks, they will ask you to have 100% collateral to back up the Letter of Credit. This means you need to secure the credit with assets or cash equivalent to the value of the credit. Although we can cover the costs of an SbLC from funding proceeds, within reason, banks will charge a fee for issuing such instruments (SWIFT MT760 is the main cost), usually between 0.5% and 2%, but also allow for the cost of collateral if you are not its source. In case the bank insists on collateral and you don’t have it, you will need to find a third party “sponsor” or make other arrangements to provide it. | Some banks will offer SbLC to their customers without collateral, though this depends on balance sheet depth and your relationship with the banker. Knowing these costs is important to include in your financial model. In some rare situations, if you don’t have enough collateral, a bank might still issue an unsecured LC if they think the transaction (called an “undertaking”) is low enough risk for them. It’s crucial to understand these aspects to ensure smooth pre-qualification for funding your mid-market impact project(s). |
Monterey Bay, California
+1 831-761-0700
info@in3capital.net