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Project Funding – How Bank Instruments Help Borrowers Qualify

Collateral for Project Funding
Making it Easier for Project Owners without Collateral

If you have applied for a project loan/funding and were rejected because there was not enough  assets to get a loan approval;  consider leasing/borrowing a cash back  bank instrument such as Bank Guarantee or a Standby Letter of Credit.

In most cases funders/lenders  whether commercial or private will want borrower/project owner  to have specific  percentage % of assets (i.e. appraised  real estate, assets)  to qualify for the loan.

For example, if you apply for a 10 Million dollar loan your lender may ask for assets  that total up to 10% of Loan or  1 Million in assets to qualify for the loan.

If you did not have that 1 Million in assets  consider leasing a 1 Million  BG or SBLC  for 5-10% of 1M  which is  50K-100K  instead and   much easier to come up with than 1M.

Bank instruments often are issued by the Top 25  (WEB) Western European Banks although many banks issue bank instruments.  But Lenders and Funders do not accept all bank instruments as a collateral especially if bank is not  Top 25 WEB  or Top 50 World prime banks,   not rated  or issued by banks in  countries that may not be acceptable to your lender.

The issuing bank should be discussed with the  lender of the loan or funder before engaging with bank instrument provider  as often assets  are collateralized  or are assigned to the lender for the term of the loan or other term as stated in their contract.

Unsubordinated “Cash Back” bank instruments are the most desirable as collateral.  Gold back may be of interested but often the bank instruments  that are “subordinate” to other assets/ debt  are not as acceptable to some lenders.

Valid bank instrument Providers are often  related to a financial group with strong financial  capacity such as a hedge fund or trade group.  Provider would have  been “invited” to do business.  They must go through extensive compliance, must be found to be  financially qualified   and approved by private issue bankers  to be able to receive very high levels of credit line for purchasing discounted bank instruments in very large increments.

In general lease instruments are not used for trade or monetization. Purchase instruments are required for monetization or as direct asset for private trading.  Occasionally a lease instrument is accepted against a monetizers  credit to provide cash for trading.

Providers buy the bank instrument from the bank first  and sells  the bank instrument to a  buyer either as a  purchase  or lease.  Purchase BG and SBLC are normally purchased and valid  for one year and one day and may be leased for  3 months or more.

The instrument is the same in all other aspect such as cash back, assignable, without lien  or restrictions; of course subject to payment as outlined in the agreement with  provider.  Leased BG/SBLC are often   used as collateral,  balance sheet credit enhancement, or as a payment insurance for an international   transaction settlement.

Instruments are delivered from providers banker to buyers banker via SWIFT.  Receiving bank account must have  history of receiving   asset at that amount  and banker should have  Swift experience to allow smooth delivery.



Additional Reading

Project Estimating and Cost Management (Project Management Essential Library)
— The Art of Funding and Implementing Ideas: A Guide to Proposal   Development and Project Management
Letters of Credit and Bank Guarantees under International Trade Law
Apple iPad MD367LL/A (32GB, Wi-Fi + AT&T 4G, Black) NEWEST MODEL

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