Factors that affect SBLC fees:
The cost of an SBLC varies depending on a number of factors, including:
Issuing fees:
Banks typically charge an issuing fee for SBLCs. This fee is usually a percentage of the face value of the SBLC, typically 0.25% to 1%. Though some banks may charge a flat fee.
The issuing fee covers the bank’s costs for assessing the risk of the transaction and issuing the SBLC.
Annual interest:
Banks also typically charge an annual interest rate to renew the SBLC facility.
This rate is usually between 2% and 6%, but it can vary depending on the factors mentioned above.
The annual interest fee covers the bank’s costs for maintaining the SBLC facility and providing a guarantee to the seller.
Collateral:
Banks will require collateral to back an SBLC. This collateral can be in the form of cash, securities, or other assets. SBLCs require 100% backing.
The amount of collateral required will vary depending on the risk of the transaction and the financial strength of the applicant.
If the applicant does not have collateral to back the SBLC, they may still be able to obtain one, but they will most likely incur additional fees related to raising funds by either issuing debt or selling equity.
Exceptions:
Banks may make exceptions to their fee structure for clients that have financial strength or contracts with well-established firms.
For example, a large multinational corporation may be able to obtain an SBLC with a lower issuing fee and annual interest rate than a smaller company.
How to compare SBLC fees:
If you are considering applying for an SBLC, it is important to compare the fees offered by different banks.
You can do this by contacting multiple banks and requesting quotes. It is also important to read the fine print carefully to ensure that you understand all of the fees involved.
You can also hire us at Financely to market your deal to our distribution list and get back to you with their prices.
We have a network of over 18 banks that are open to issue SBLCs for new clients.
Negotiating SBLC fees:
Once you have received quotes from multiple banks, you can begin negotiating the fees.
It is important to be prepared to walk away from a deal if you are not able to negotiate a satisfactory fee structure.
Working with Financely:
There are benefits of workign with Financely when applying for an SBLC.
We can help you to understand the risks and benefits of SBLCs, and they can also help you to negotiate the best possible terms with issuing banks.
