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Usance Payable at Sight (UPAS L/C)
UPAS L/C, Usance Payable at Sight, is a derivative from the standard LC type (Sight L/C & Usance L/C). It is actually the combination between Sight L/C and Usance L/C. Simply saying, UPAS is an Usance L/C that is payable sight basis to the seller (beneficiary), while the payment settlement from the applicant (buyer) to the issuing bank will made on at the end of usance term.
Do you still remember one the biggest problem in trade finance? Yes, it is the different interest between the buyer and seller, which the buyer always want to have longer credit tenor, while the seller prefer to give shorter credit tenor to the buyer. This difference have given financial institution an idea to develop a letter of credit that could accommodate both interest through UPAS L/C.
If you still confuse, let’s discuss it using real case example,
Company A is a flour manufacturer in Indonesia, who on regular basis import wheat from Company B in Brazil. As you know, company A need to process the purchased wheat into floure, before they could sell and the flour to the end buyer and collect the payment to pay the exporter (Company B) in Brazil, say compay A’s cash to cash cycle is 90 days. Having said so, the most suitable trade scheme for company A is to use Usance L/C 90 days.
However, company B is not comfortable of the risk of Indonesian Bank / country risk, thus they refuse company A’s request to use Usance L/C 90 days, instead they are forcing company A to keep using Sight L/C.
In order to accommodate both parties’ requirements, the issuing bank propose a 90 days UPAS L/C solution to both parties. 90 days UPAS L/C means that it is Usance L/C 90 days to the applicant (buyer) and it is Sight L/C to the seller (beneficiary). Having said so, the issuing bank provides financing to the applicant (buyer) so the seller could still receive the payment at sight basis, while the applicant could still enjoy the 90 days credit term from the bank.
Since the issuing bank already paid the seller at sight basis, while they will only get the principal payment from the applicant (buyer) at the end of usance term (90 days), thus the issuing bank will charge financing interest to the applicant (buyer). The payment made by the bank to the seller is final (non recourse basis), thus it the same as sight L/C for the seller.
Wording in L/C :
42.C. Draft at.. 90 days after B/L (or other benchmark)
47. Additional Condition
Eventough the usance period of 90 days, this L/C is payable to the seller at sight basis. Financing interest is borne by applicant.
Note : The wording can be different among different issuing bank, but the wording should have the same meaning as the above.
UPAS L/C Diagram
Example : 90 days UPAS L/C
1. Sales contract between buyer and seller
2. Buyer (applicant) request their bank (issuing bank) to issue a 90 days UPAS L/C for the seller
3. Issuing bank , upon receiving the request, issue a 90 days UPAS L/C to seller’s bank (advising bank)
4. Seller’s bank (advising bank) then advise the UPAS LC to the seller (beneficiary)
5. Seller then ship the goods to the buyer
6. Upon shipping the goods, the seller prepare all documents as requested by the UPAS L/C, and then present the documents to their bank / bank that is specifically nominated by the UPAS L/C to receive the documents (negotiating / nominated bank).
Note : Usually advising bank & negotiating bank is the same bank, but could be different.
7. Negotiating bank checks the presented documents, then deliver the documents to the issuing bank
8. Issuing bank upon receiving the documents sent by the negotiating bank, will start check the documents within max 5 banking days, and once they find that the presented documents are comply with the UPAS L/C terms and conditions, they will pay the seller through the negotiating bank right away
9. Negotiating bank will credit the payment proceed from issuing bank to seller’s account with them
10. Buyer provides their payment undertaking for principal and interest on maturity date (day 90) to to the Issuing bank, can be in the form of signed draft (Bill of Exchange) or Promissory Notes.
11. Issuing bank then release all documents to the buyer, including Bill of Lading.
12. Payment by applicant (buyer) to the issuing bank on day 90 (maturity date) for both principal (P) & Financing Interest (I)
UPAS L/C Timetable
What you need to know about Monetizing Bank Instruments
What you need to know about Monetizing Bank Instruments
One thing I have noticed about this niche of finance is that common sense does not prevail. Allow me to be even more frank. Most people don’t know what they are doing.
Yeah you heard me right.
Most people, brokers included, have absolutely no clue what it takes to be successful in Monetizing Bank Instruments.
Many brokers think that if they have an instrument, then someone who is involved in monetizing bank instruments will automatically give them several million in cash and it’s all over. In reality however, the truth is much different.
People who purchased a Bank Guarantee, a Standby Letter of Credit, or other bank instrument are often shocked to learn that their newly purchased instrument was never designed to be monetized and is therefore worthless for their intended purposes.
Bank Guarantees can be worded specifically for monetization, i.e. to secure credit lines. Not all Bank Guarantees are intended for monetization so it is important to understand what you paying for and what you are getting to ensure that it will work for your intended purpose.
If you don’t have a bank instrument, we suggest acquiring your BG from us, this means that the monetizing process will be easier, smoother and faster since we provided the instrument through our prime banks.
The truth of the matter is that having the money to buy an instrument doesn’t mean that your project will get funded or that your bank instrument can or will be monetized. Of the limited providers who work with Monetizing Bank Instruments, it is very possible that none of them will be interested in monetizing your Bank Guarantee.
What you need to know…
First things first. You should know who will be monetizing your instrument before you purchase it. You should also understand that not all BG’s or SBLC’s are the same.
Pay attention to where the BG is coming from. Is it from Europe, Africa or Asia? The jurisdictions and legal ramifications are not the same and you should know and understand the differences. This will also affect the instrument’s cost and acceptability to third parties.
Read the language and text of your SWIFT MT-760, Bank Guarantee or SBLC carefully. Pay attention to every word and have it reviewed by professionals and the beneficiary prior to paying for anything. Verify if the bank instrument is intended for monetization and find a supplier who will monetize it in advance.
I already bought an instrument! Now what?
This is where the confusion and frustration sets in. You have your BG or SBLC and your monetizer fell through. You now need another provider that specializes in monetizing bank instruments.
DL Financial Limited can help, however, Your Bank Guarantee is not enough. Just showing someone your BG or SBLC text will not be sufficient to establish a credit line. Of course the text is the first thing we will look at but its far from the only thing we will consider.
What else is needed to be successful in Monetizing Bank Instruments?
Several things. A business plan and solid relationships are a good start. In other words, you must have an actual project and a professional business plan.
The key is that you must have your paperwork together and you must have a tangible way to make money from your project or investment. Ultimately the investor must like and believe in your project. Anyone can purchase a Bank Guarantee but only those who have done the hard work will actually get in monetized.
Be prepared to submit a full CIS (or Bio/Application) on your company and its officers along with a complete business plan and the text of your BG or SBLC. Explain how you acquired the BG and why you need it monetized.
Go into detail about how you plan to exit this strategy and how you intend to return the instrument at the end of the term. Be aware that you may need to show POF (bank statements, not blocked funds) in many cases. Good luck and happy new year to all our numerous customers from around the world. My wish is that this year all your dreams and plans will come to fruition.
If you want to lease, rent or purchase a BG, SBLC, DLC, letters of credit etc or you want us to monetize your instrument, kindly contact us with below information.
Getting Your Projects Funded, Project funders, project financers
Joint Venture Funding – How to Present Your Project to Get Funded
DL Financial Ltd Welcomes you to the last quarter of 2015, the defacto year of Joint Venture (JV) financing. Institutional financing is not available so developers are looking outside the box to fund their projects. The most common form of favorable financing is JV. This financing comes in more shapes, sizes, and terms than colors of the rainbow. There are, however, a few common things that all JV funders look for, regardless of the project, location or dollar amount. The purpose of this article is to share with you what these common denominators are and how you should present your project to get the most favorable terms.
Let’s look at this from your potential funder’s perspective. What does he want? The answer is simple, but arriving at achieving his goals involves a tremendous amount of scrutiny and due diligence on you, the developer. Quite simply, the JV funder wants a return on his investment. You must speak his language. What he wants is a pro forma that shows what his internal rate of return (IRR) is at two and five years. If you cannot prepare one of these, find someone who can. This document or spreadsheet shows vision and the common goal of making money.
Everything else is secondary, but also very important. You need to prepare a package that consists of the following items:
- an executive summary of the project that is no more than 5 pages (no funder will read a 120 page business plan before reading an executive summary)
- the proforma
- bios and resumes of all of the key players, including your contractors
- the entire business plan
- an appraisal if you have one
Logically, the funder has the money. You have to prove that you have the brains, muscle and integrity to be a great and cooperative partner. Your opportunity is not the only one on his desk, but it will certainly be the most presentable. Sloppy presentations make for sloppy projects.Finally, the worst thing you can do is put pressure on the funder to act or fund immediately. Desperation only indicates weakness and poor planning.
Bank Guarantee ICBPO Myth…. Exposing the Truth!
Bank Guarantee ICBPO Myth…. Exposing the Truth!
We work with 6 of the 7 largest funders in the world and NONE will reply after a BG Issuer sends a 799 with an ICBPO! It is a myth that a Funder will send an ICBPO to a BG Issuer! It is hard to find one single funder that will do this… It is usually unformed people that has no clue about bank Guarantees and SBLC that still talk about ICBPO because ICBPO has been banned and is now illegal.
Why? When an ICBPO is issued the BG Issuer can then take the ICBPO and leverage it to buy a BG! This means that people can promote themselves as BG Issuers when they actually DO NOT have ANY Bank Guarantees at ALL.
They use the ICBPO commitment from the funder to go and buy a Bank Guarantee to supply to you the client, so you can complete the deal. Funders have known about this game for years, they see it as misrepresentation and fraud.
As a result almost all Bank Guarantee Funders will NEVER in their right mind will EVER issue an ICBPO because they will not allow the funders ICBPO to be leveraged by the BG Issuer prior to settlement.
How to Obtain a Standby Letter of Credit
How to Obtain a Standby Letter of Credit
Obtaining a standby letter of credit is similar to obtaining a commercial loan, though with a few key differences. As with any business loan, you will need to provide proof of your creditworthiness to the bank.
Unlike a loan, the process for approval for a SBLC is much quicker, with letters often being issued within a week of all paperwork being submitted. Also unlike traditional loans, the bank will require a fee of between one and ten percent of the SBLC amount before issuing the letter. This fee is usually charged per year that the letter of credit is in effect. If the terms of the contract are fulfilled early, you can cancel the SBLC and not incur additional charges.
For small business owners, the standby letter of credit can be a powerful tool for establishing trust with suppliers and vendors. Obtaining an SBLC is proof that you and your company have good credit, and can put many suppliers at ease about providing you favorable financing terms. Furnishing a financial SBLC can often allow you to negotiate payment and financing terms with suppliers from a position of strength in order to get the best interest rates and payment schedule, while maintaining a good relationship with your suppliers.
If you provide services, on the other hand, offering to furnish performance standby letters of credit can be extremely useful to helping your business secure large contracts. Putting your clients at ease by being willing to guarantee your work financially can overcome many of the objections business owners face in the selling process.
We Are Helping Bank Guarantee Brokers Bank Big Deals
Bank Guarantee Brokers…. If you want to earn big commissions work with a company like DL Financial Limited that delivers without stories! Too many brokers waste time and money chasing dreams of big deals with service providers that NEVER deliver and as a result they NEVER get paid and end up with NOTHING.
Rule #1 to getting paid on Big Deals, work with a company that performs!
DL Financial Ltd pays attractive commissions and ALWAYS protects Brokers. Please read the Top 11 Reasons Why DL Financial Limited is #1 and Review our Broker Agreement or contact us via email for more information.
We look forward to working with you!
Genuin providers of Loans, Project Funding, purchase bank guarantee, SBLC & DLC
DL Financial Limited is legally registered in London with company registration number: 09474265. Our major partners and private investors are Arab and Middle East investors which is why we offer very flexible loan terms; our loan interest rate is 3% per year which is one of the lowest in the industry.
We are also direct providers of bank financial instruments such as Bank Guarantees (BG), Standby Letters of Credit (SBLC), DLC and Letters of Credit. Our Bank Instruments are issued by top prime banks such as HSBC London or Hong Kong, Barclays bank London, Citi Bank New York, Standard Chartered, Deutsche Bank, UBS Zurich, Switzerland or any bank of your choice.
OUR SERVICES INCLUDES BUT NOT LIMITED TO:
Loans & International Project Funding
Lease, Rent or Purchase Bank Instruments such as BG, SBLC, DLC, Letters of Credit (L/C)
Proof of Fund (POF) or Blocked Funds for Investments
Insurance & Escrow Services
Trading Platforms
Show Net Worth Requirements
Corporate Finance
Private Equity
Investment & Wealth Management
Financial Banking Instruments for Lease and Sale (BG/SBLC/LC)
Dear Partners/Associates,
We offer Legitimately Cash & Asset Backed Financial Instruments on Lease and Sale at the best rates and with the most feasible procedures. Instruments offered can be put in all forms of trade and can be monetized or discounted for direct funding.
We are genuine and the most reliable providers in Europe, we offer certifiable and verifiable bank instruments via Swift Transmission.
GENUINE BANK GUARANTEE (BG) AND STANDBY LETTER OF CREDIT (SBLC) FOR LEASE AND SALE AT THE LOWEST RATES AVAILABLE. OTHER FINANCIAL INSTRUMENTS SUCH AS MTN, CD, DLC, PB ARE ALSO AVAILABLE.
Kindly contact us today for genuine inquiries and I can provide you with the needed information.
Mr. Laurent De Landtsheer
Skype: dl.financial.limited
Website: http://www.dlflimited.net/
Blog: https://dlfinancial.wordpress.com
EMAIL: info@dlflimited.net OR credit.finance2012@gmail.com
DL FINANCIAL LTD: Unrivaled Credibility, Integrity & Safety
DL Financial Limited has an exemplary record of operation which includes:
- No Customer has ever had a failed transaction with us
- No Attorney Complaints Letters Ever
- No Govt or Local Agency Complaints Ever Received
- No Lawsuits ever filed against us
- No Criminal Convictions for the Business in any Country
- No Criminal Convictions for the Founder in any Country
DL Financial Limited has carved out a reputation for credibility, transparency and responsibility. We care about our customers and we care about their money!
Read what our Clients have to say about DL Financial Ltd…... Click Here to read our CUSTOMERS TESTIMONIALS.
In recent years DL Financial Limited has taken significant market share away from our competitors, many of which chose NOT to operate with the same level of ethics and values that we consider the cornerstone of our business.
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