Bank Instruments BG SBLC Monetization
BG Bank Guarantee – A bank guarantee is when a lending institution promises to cover a loss if a borrower defaults on a loan, Bank guarantees are frequently used in international trade and ensure both sides in a contractual agreement from credit risk.
SBLC Standby Letter of Credit – SBLC a guarantee of payment by a bank on behalf of their client in which the bank fulfills payment obligations by the end of the contract if their client cannot. Financial standby letters of credit ensure financial contractual obligations are fulfilled.
Similar to the bank guarantee, SBLC is also of two types, financial and performance. Financial SBLC focuses on ensuring that the payment is made. In contrast, performance SBLC focuses on ensuring that the criteria of work decided upon are being fulfilled, e.g., time, quality of work, etc.
A medium-term note (MTN) is a note that usually matures in five to 10 years. A corporate MTN can be continuously offered by a company to investors through a dealer with investors being able to choose from differing maturities, ranging from nine months to 30 years, though most MTNs range in maturity from one to 10 years.
MTNs offer investors an option between traditionally short-term and long-term investments. This can be ideal for situations where the investor’s goals fall into a time frame beyond those offered by certain municipal bonds or short-term banknotes without having to commit to the long-term note options.
A letter of credit (LC), also known as a documentary credit or bankers commercial credit, or letter of undertaking (LoU), is a payment mechanism used in international trade to provide an economic guarantee from a creditworthy bank to an exporter of goods. Letters of credit are used extensively in the financing of international trade, where the reliability of contracting parties cannot be readily and easily determined. Its economic effect is to introduce a bank as an underwriter, where it assumes the counter-party risk of the buyer paying the seller for goods.