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The SBLC Transaction Project Funding Loan Program

​This unique funding program provides an innovative path to project financing and offers borrowers the possibility of 100% financing. The project funding is accomplished in two parts. The first part is the issuing and monetizing of an SBLC and the second part is the processing of the project loan which comes after the SBLC transaction is completed as it is the funds generated from the realized value of the SBLC that funds the loan.

The Project Loan Highlights

• ​​​​Minimum Project Loan for this program is $25M USD
• 48 month term, interest only
• ​Non-Recourse, no personal or corporate guarantees
• Borrower can capitalize interest and fees
• ​Lending group seeks a minor equity participation in the project
• Very flexible repayment options. Lender will convert to permanent financing
• ​No prepayment penalty
• Funding typically in 60 days
• ​100% Project Financing
• Available Globally

 The engagement model for this program is non-negotiable.

PLEASE READ CAREFULLY.

To successfully engage this funding program, the borrower must provide a third party who is capable of either purchasing the SBLC directly  or holding it as security and issuing a credit line against it. These are new issue cash backed Instruments - Stand By Letter of Credit (SBLC), Commercial Letter of Credit (LC) or Bank Guarantee (BG) - from Barclays UK or HSBC NY or London. 

The 3rd party interested in receiving the instrument needs to make an offer for the SBLC in order for our lending group to evaluate what they are offering for it and determine if they want to proceed. The offer can be one of two possible options ​outlined below:

​OPTION 1: Non-Recourse Immediate or Tranche Payout. Cashable.

​In this case the instrument would be "cashable" at maturity.  If the offer is an immediate one-time, non-recourse payout at closing, the target LTV is between 75% and 85%. If the offer is a tranche payout, there is a minimum of 50% of the face value paid at close, with the rest paid across a few months, then the targeted LTV needs to be between 90% and 95%.

​OPTION 2. Recourse Loan or Bank Line of Credit. Returnable. 

Under this scenario the instrument would be "returnable" at maturity - meaning the SBLC would be returned in full value in 12 months plus a day. Here our lending group seeks a 75-85% LTV on the SBLC. These funds would be wired to them in full as a Line of Credit. Our lending group will repay the Line of Credit within the 12 month maturity of the instrument. The bank or monetizer would simply hold the instrument as security and also be able to leverage the instrument on their balance sheet for a year.

​NOTE: these instruments are created for the transaction, so our lending group must see the terms of the offer FIRST to determine if they want to go ahead and have the SBLC issued.

​What Your Bank or Monetizer Needs to Know

People dealing with SBLCs on a regular basis are accustomed to and expecting to work with existing instruments. As a result they will almost always ask you to look at the "SBLC verbiage". However, as mentioned previously, this is not a typical SBLC transaction. This program is only using New Issue, cash backed instruments, meaning the instrument will be created for each individual transaction.

These cash backed instruments will come from either Barclays UK or HSBC London or HSBC NY.  As a result, of them being created for each transaction, each SBLC can be customized to have any verbiage that the receiving bank or the private monetizer desires. While the SBLC verbiage must always conform to ICC600, International Banking Standard, our lending group can tailor the SBLC to have any wording the bank prefers.

​In fact, we want them to provide their desired verbiage so the SBLC can yield the BEST LTV POSSIBLE. ​

How to Proceed

There are specific "non-solicitation" rules in banking and as a result our lending group’s banking team cannot initiate contact with the receiving banker - this must be done by the banker whose bank will receive the instrument. To accomplish this our lending group requires the borrowing group's banker to send the borrower (as their client) an email that can then be forwarded to our lending group’s banking and legal teams assigned to the transaction.

This email from the bank will have to include the following elements:

1. RWA Paragraph. This paragraph will state that the receiving bank is "Ready Willing and Able" to receive a SBLC from HSBC or Barclays for that has the face value of the transaction to be considered.
2. Banker's Business Card. This will identify the banker, the bank, and include their contact details such as email and phone numbers and ideally their address ​
3. Sample SBLC Verbiage. Since our lending group can customize the wording of the instrument to suit what the receiving bank desires, they would like the bank to provide the verbiage that will allow the bank to offer the best LTV possible.
4. Confirmation if it will be a non-recourse payout, or a recourse line of credit.  If it is a recourse line of credit, they will need to include the proposed term (length of time available) and the interest rate.

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The email below is an actual example from a top tier bank on a recent transaction. If there is a different amount, interest rate, term or recourse/non-recourse situation, then the receiving bank would just take out the offer shown here and substitute in their own offer.

 

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"Dear [client name],

Further to our conversation on the subject, I note that [bank name] is ready, willing, and able to receive a clean, new issue SBLC from {HSBC London | HSBC NY or Barclays UK] of up to $500M USD [or appropriate amount].  It would be possible to set up a Line of Credit upon receipt and confirmation of this instrument at a LTV of 90%, contingent upon satisfying our underwriting and compliance requirements, as well as any other condition precedent deemed relevant for [bank name], for a transaction of this nature. Following this, we would expect the process to begin with a MT799, followed by a MT760. 

​Generally speaking, once an SBLC is received in line with established conditions precedents, credit facilities would be perfected and made available to the subject borrower for draws as agreed within a subject credit agreement within 5 business days [or bank's appropriate timeline]. 

Again upon condition of satisfying all compliance requirements, this would be a Non-Recourse Line of Credit to be perfected after [bank name]’s internal evaluation and adjudication. Any other line of credit terms to be determined by underwriting. The SBLC would be returned to the issuing bank upon full settlement of the line of credit.

[Bank Name] will also confirm within the final contract that upon ordering the issuance of the SBLC, that we will guarantee with full bank responsibility, that the cost for the issuance of the SBLC will be fully covered by [bank name] in the event that [bank name] backs out of the deal or fails to perform after the SBLC has been requested. That cost would not exceed 2% of face value. 

Attached please find our preferred SBLC verbiage.  Below is my contact information, as I will be handling this transaction on behalf of [bank name].

Thanks,

[banker name]
[banker email]
[banker phone contact numbers]
[if possible, banker's bank address]
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If the offer is coming from an easily vetted bank, then the email is all that is required to engage. However, if the offer is from a corporate entity and not a bank then a "proof of capability" will be required. This could take the form of (a) a proof of funds, (b) proof of a credit line with sufficient existing capacity or (c) a comfort letter from their bank confirming the bank's willingness to extend credit to the entity upon successful receipt/confirmation of the SBLC.

Once you've received the email offer and have forwarded it (with proof of capability, if required) and upon acceptance of the offer, our lending group will engage their banking and compliance team to confirm the offer and begin setting up the transaction. 

Once The Offer is Accepted

Upon the acceptance of the offer, the contracts are set up and with the SBLC transaction completed, the funds are wired to the lending group (providing the SBLC) as outlined in the contracts. From the funds received, the lender will recoup their funds, recover costs and retain a portion of the funds for risk mitigation. The loan will be made from the remaining funds available and the face value of the SBLC is determined to accomplish all of this.  As a result, the face value of the instrument will always exceed the loan amount required and will depend on the actual offer.

Does Your Project Qualify?

The project is evaluated on the strength of the business plan, the risk profile of the project and the likelihood of achieving the revenue for repayment of the loan. Management experience and a good track record are also a factor. 

To see if your project would qualify for this lending program, the borrower can present a Loan Request Summary (LRS)  in the hopes of receiving a Letter of Interest (LOI). We will conduct a preliminary review of your documentation and if the project is acceptable the lender would issue a conditional LOI, subject to risk assessment and the successful closing of an SBLC transaction. 

You can download the Loan Request Summary Form which includes a document checklist. You will need to submit: a complete business plan, sponsor’s bio and a 5 year pro forma, detailed project budget, use of proceeds and your desired draw schedule. 

Please note: that while an LOI is possible, it is important that there is evidence of a 3rd Party interested in the SBLC transaction before we will undertake the Loan Request Summary for the LOI.
Without an offer pending from a qualified third party, there is no point in reviewing the project, because there is no path to actually funding it.  

NOTE #1:  Investor decks and materials used previously for seeking other forms of capital are not acceptable. The materials you provide need to reflect your debt financing requirements AND the project budget must align with the project’s required loan amount.

Note #2:  Ideally the project budget should not include financing expenses related to the loan. We will provide you with a financing snapshot including interest and fees that highlights approximate carrying costs on a 48 month term.  

Note #3:  When it comes time to submitting the formal loan application and intake package is it very important that the submission clearly demonstrates how the funding will be used to drive revenue that will result in ultimate repayment of the loan. Ideally this is more than a spreadsheet and actually takes the form of a one or two paragraph business justification which ties the funding to the business plan, to revenue generation resulting in the borrower’s exit strategy for repayment of the loan in full.

​Setting Up the Project Loan

Note the project loan is provided by our private lending group and not the 3rd party receiving the instrument. The receiving bank/monetizer wires the funds to our group issuing the instrument and a portion of the funds received will serve as the "proof of funds" of your loan application. It is at this point that the formal loan application is submitted and the project goes through the intake and  risk assessment. ​ Once processed and having passed risk assessment, a Term Sheet is issued.

Since our lending group is financing 100% of the project, they will ask for a minor equity position in the project. Equity is calculated on a case by case basis, in accordance with the project’s profitability expectations and risk profile. The equity requirement is presented AFTER the terms of the loan are agreed upon. The equity portion will also include a negotiated and mutually agreed upon buy-out clause. 

The interest rate applied to the project loan is dependent on how the SBLC is monetized. If the offer is a credit line, then the borrower’s loan will be charged AT THAT SAME INTEREST RATE established by the monetizer. However, if it is non-recourse payout (option 1), then the interest rate on the project loan is our current lending rate of 3.5%.

Once the Term Sheet is executed and the equity has been negotiated and agreed, the 
borrower is required to escrow $25,000 USD into the law firm's IOLTA Account as a non-refundable deposit towards the closing costs and preparation of the Final Loan Agreement. This amount will cover all/most/part of the legal costs for their Final Loan Agreement, (depending on complexity), and the Law Firm will furnish the borrower with a complete invoice showing their allocated time and charges. Depending on the actual final cost, there may be resulting “credit” or a balance still owing above the $25,000, which can be settled up after the close of the loan. Then with the loan contract drawn up and executed and the financing of the project can commence according to the project’s Use of Proceeds.

FEES & COSTS

Standard lending fees apply: The 3% Lending Fee and Closing Costs are due at close and paid out of proceeds. The monthly flat fee of $5,000 USD for the project caretaker is invoiced by PWC directly every month. The lender will ask for a minor equity ownership position in the project, which will always include a negotiated and mutually acceptable buy-out clause.
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weLLcome capitaL Fees: will not exceed 3% of the loan amount and is paid out of the first draw.  An engagement fee of $5,000 USD is invoiced when we undertake preparation of the formal loan application and intake package. This fee is due only after the LOI has been accepted OR the SBLC transaction has been confirmed by the banks. The engagement fee is refundable from the finder's fee paid out of the first draw. NOTE: Our Mutual Non-Circumvention and Non-Disclosure Agreement (NC/NDA) and Finder’s & Financial Agreement both need to be executed at the outset.

SBLC Process Diagram

Download The Loan Request Summary Form

As noted above, the engagement model for this program is very strict.
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​If you can meet these intake requirements, get in touch.

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