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Bank Guarantees and SBLC: Security in your Financial Transactions

When faced with large financial transactions, whether a business loan or a large-scale commercial transaction, you need to be confident that your interests are protected. This is where bank guarantees and Standby Letter of Credit (SBLC) come in.

What is a bank guarantee?

A bank guarantee is a guarantee that a banking entity will cover a debt in the event that the party that originally incurred it is unable to meet its financial obligations. This type of guarantee is crucial in commercial and financial transactions, as it ensures that economic obligations will be met. These guarantees can be used in a wide variety of situations, from guaranteeing a loan to confirming that a contract or business agreement will be carried out.

What is an SBLC?

SBLCs, or Standby Letters of Credit, work similarly to bank guarantees. An SBLC is a payment guarantee provided by a bank on behalf of a customer. This guarantee is used as a "second source of payment", which means that the bank will pay only if the client cannot meet its financial obligations.
SBLCs are especially useful in international trade, where large-scale transactions can involve a degree of risk. If a seller in an international commercial transaction is unable to meet its obligations, the SBLC provides a guarantee that the buyer will still receive payment.

Why are Bank Guarantees and SBLCs important?

Bank guarantees and SBLCs are essential tools to mitigate risks in financial transactions. They provide a layer of security that ensures that financial obligations will be met, even if the party originally responsible is unable to do so. This can be especially valuable in situations where the amounts of money are significant and failure to comply could have serious financial consequences.

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Financial Guarantees through Insurance Companies

FOR THE COMPANIES

A) Access to financing in the most optimal market conditions.
B) Access to financing in longer terms.
C) Improvement of the company's financial framework.
D) Expansion of risk capacity since the company is covered against possible deficits.
E) Continuous advice in all processes.

FOR FINANCIAL ENTITIES

A) High quality of the guarantee, guarantee of an effective response to possible incidents.
B) Suppression of the costs derived from the risk factor.
C) They provide credit institutions with a greater field of commercial action with respect to SMEs.
D) Absence of provisions for insolvencies.
E) Reduction in the consumption of own resources by up to 20% in operations with guarantee.

BANKING

INVESTMENT
For operations that are intended to finance the establishment or expansion of fixed assets, they can also be presented to guarantee Rentals, before Ministries, Banks, etc.-

CIRCULATING
For operations that are intended to provide liquidity to Companies.-

ENTREPRENEURS

For operations that are intended to finance the development of new initiatives carried out by entrepreneurs.-

ICO
For investment financing as well as liquidity needs, inside and outside the national territory developed by the Official Credit Institute (ICO).-

MICROCREDITS
For long-term financial operations that are intended for the initiation or improvement of very small business activities.-

NON-BANKS

WE LOANS CDTI AND BEFORE THE ADMINISTRATION
For operations that are intended to guarantee loans granted by the Center for Industrial Technological Development (CDTI) or another Public Administration Organization for new projects.-

MONEY GUARANTEES TO THIRD PARTIES
To Guarantee all monetary commitments with your creditors for any reason that arise from your business activity.-

ADVANCES AND SUBSIDIES
To Guarantee the obligations acquired with the Administrations and Public Organizations when requesting the advance payment of the subsidies granted by them.-

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Guarantees before the administration and individuals

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PROVISIONAL BONDS
To guarantee the commitments derived from the Tender in Work Contracts, service management, supplies or similar.-

INTERNATIONAL PROVISIONAL BONDS
Guarantee the needs derived from the tender in construction contracts, service management, supplies or similar.-

DEFINITIVE BONDS
To guarantee the achievement of work, service management, supply or similar contracts that are formalized with them.-

FINAL INTERNATIONAL BONDS
Guarantee compliance with construction, service management, supply or similar contracts formalized with them.-

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GATHERING
To guarantee the obligations acquired as a result of the advances that they make for the collection of materials and machinery.-

ACTIVITY
Guarantee the necessary requirements for the development of business activity.-

ALTERNATIVE ENERGY
Endorsement before the Autonomous Community to obtain access to the network for the start-up of an alternative energy installation.-

GOOD END OF THE CONTRACT
Guarantee all NON-monetary commitments with your creditors for any reason that arise from your business activity.-

REPLACEMENT OF WITHHOLDINGS
Guarantee all NON-monetary obligations with your creditors for any reason that arise from your business activity.-

Frequently asked questions

Wondering how the sevice works? Confused about how it can improve your links?

Dive into our FAQ for more details

Issuances of documentary letters

It is one in which the beneficiary has the right to receive payment from the issuing bank or the confirming bank, at the time of presentation of the documents in accordance with the terms and conditions of the Standby Letter of Credit. or SBLC).

The Standby Letter of Credit (SBLC) (or contingent credit) does not constitute a means of payment itself but rather functions more as a guarantee. It is a payment guarantee issued by a bank on behalf of a customer that is used as payment in the event of default by the applicant. Standby Letter of Credit (SBLC) are issued for use in a wide variety of commercial and financial operations.

What is the procedure to manage an SBLC issue?

Our work procedure for clients who wish to obtain the issuance of a Standby Letter of Credit (SBLC) is to provide us with the company's Client Information Sheet (CIS) including a copy. of the passport of the administrator or agent, Deed of being administrator or agent of the company, copy of the Number, Registry or Tax Identification Code of active Legal Entities.

Once said documentation is received, the draft text of the Standby Letter of Credit (SBLC) will be sent to the client or so that their Bank or Supplier can confirm whether they accept the text of the Letter of Credit in Wait (Standby Letter of Credit or SBLC) and if it is accepted by the receiving Bank, the text of the draft must be returned to us signed on all pages to confirm acceptance by the client.

Next, the Contract and the Invoice will be sent to the Client, of which they must return it signed and make the payment corresponding to the percentage according to the Bank that has been selected for said Standby Letter of Credit (SBLC) and a Once our Banking entity has confirmed receipt of the money for the payment made by the client, the Standby Letter of Credit (SBLC) will be issued, although NO issue will be made if the payment is not confirmed. by our Bank.

Monetization of banking instruments

Monetizing an SBLC (Standby Letter of Credit) means converting or transforming the credit value represented by the SBLC into liquid funds or cash.
In essence, the monetization process involves obtaining financing using an SBLC as collateral.
This can be useful in situations where the SBLC holder needs monetary funds and is willing to use the credit support of the banking instrument to obtain loans or lines of credit.

What is the procedure to monetize an SBLC?

Send KYC of the company, CIS of the manager, commercial and tax registration of the company, the Project and/or the Business Plan.
Send LOI (letter of intent to monetize an SBLC) for the execution of the business project.
Initial guarantee deposit, from 0.30% to 2.5% of the face value of the SBLC. (depends on the amount, type of project and financial risk)