A distinction must be made between owned and leased bank instruments. Where a BG/ SBLC is owned by a client and being monetised i.e sold, the buyer will not have a problem in drawing down a line of credit from his bank as the instrument will serve as security and is callable by the beneficiary at maturity date.
In the case of a leased BG/ SBLC which has to be returned to the issuing bank prior to maturity, the monetiser has the responsibility of repaying the credit facility to his bank and will not pay the BG/ SBLC applicant a non-recourse discounted value. However, this issue can be overcome by the client entering into a Joint Venture Private Placement Program (PPP) with the funder. The funder will usually enter into a PPP under its own KYC and will open a joint non-depletion bank account with the client in order to block the cash funds for the trade program. Trade profits will then be distributed on a weekly or monthly basis depending upon the terms of the trading contract.
For a BG/ SBLC buy/ sell transaction, the monetisation process typically takes 5 – 10 banking days from receipt of a completed Client Information Sheet. In the case of BG/ SBLC funding via a PPP, the process of monetisation of the bank instrument and entering the trade program will take 15 – 20 banking days.