Leasing of Bank Guarantees and Standby Letters of Credit, or to give it its correct title "Collateral Transfer" is on the increase.Find out more at [URL]www.intacapitalswiss.ch[/URL]
Due to the difficulty placed on firms needing to obtain additional credit or project finance by the banks, Collateral Transfer facilities are becoming more and more common.
As banks tend to be more selective of the type of security that they lend against, firms wishing to borrow welcome these types of facilities.
Bank Guarantees received through C/T facilities may be used by the Beneficiaries to secure credit lines at their bank. Typically, a banker will have no objection to offering credit against Bank Guarantees received in this manner up to 100% of face value, less of course advance interest charges and bank fees. Credit terms can be for the duration of the Guarantee, i.e. 1 to 5 years.
The Guarantees that are issued under these types of facilities are worded specifically to secure credit lines. Guarantees are issued under ICC758 protocol and are readily accepted by all international and private banks.
It is important to note that although the Bank Guarantee is obtained through the Collateral Transfer facility (or as others choose to say ‘leased’), this has no bearing on the quality of the Guarantee and can still be used to raise credit and loans. As the verbiage of the Guarantee is ICC758 standard approved wording, there is no mention of ‘lease’ within the instrument itself.
It is also important to know however, that by using the Guarantee to secure credit and loans, interest charges will apply in addition to the Contract Fee (the ‘rental’ fee of the Bank Guarantee). From our experience, international bank lending rates for loans secured against such high quality security tend to be in the region of 03,00% per 12 month term. Although of course this may differ in certain jurisdictions.
IntaCapital can of course assist its clients in raising credit against guarantees of this type in the event that our clients own bank declines to offer lending facilities. We hold strong relationships with understanding banks and private equity groups holding an appetite to expand lending opportunities in this area. It should be noted however that additional fees will apply if you utilise our services to obtain credit lines.
IntaCapital can also open banking and lending facilities for its selected clients by direct introduction to the willing bank. Please enquire for a detailed quotation.
It is of course common sense that you first need to be approved for receiving the Bank Guarantee prior to applying for credit against it.
For more information about raising credit lines against bank guarantees, please visit www.intacapitalswiss.ch