Posted in Finance

Things to Know about SBLC

standby letter of credit (sblc)

SBLC or the Standby Letter of Credit is a letter in the form of guarantee that says the bank will pay on behalf you. However, a lot of people still have very little knowledge of the SBLC or the standby letter of credit and that is why, here are a few things you should know about SBLC –

1. Letters of credit or the Standby Letter of Credit (SBLC) are sometimes referred to as negotiable or transferrable. The issuing bank will pay a beneficiary or a bank that is nominated by the beneficiary. As the beneficiary has this power, they may ‘transfer’ or ‘assign’ the proceeds of a letter of credit to another company.

2. SBLC or the Letter of Credits can be discounted but only if it is payable after 90 days or if it is transferrable. In this case the beneficiary has the privilege of assigning it to be payable to a funder. This is so that the funder will provide the beneficiary with a discounted value just after the terms of the letter of credit have been fulfilled.

3. In order to fund an SBLC or a Letter of Credit the bank has to receive typically any assets or cash as collateral in order to issue you a standby letter of credit. And there is a particular fee for the service and it comes as a percentage of the letter of credit value.

4. When it comes to governing the SBLC or the Letter of Credit, The International Chamber of Commerce Uniform Customs and Practice for Documentary Credits governs the way in which these instruments are to operate.

5. There is no non-payment procedure under SBLC. The fee must be paid in order to obtain an SBLC.

6. In case, if the bank who has provided you the SBLC fails to pay, (which is pretty rare), in that case, another stronger bank will pay on behalf of you.

There are plenty of reasons why you should invest in an SBLC as they are quite beneficial and you get a lot of benefits out of the same. However, you need to make sure that you are getting the SBLC from a trusted bank and you understand everything properly before you fund an SBLC.

The SBLC is a great way to grow your business both nationally and internationally and you should definitely consider investing on the same.

Posted in Finance

Buying and Selling Financial Instruments

financial instruments

When we talk about financial instruments, we understand that these are assets that can be traded. They can also be seen as packages of capital that may be traded. Most types of financial instruments provide an efficient flow and transfer of capital all throughout the world’s investors.

These financial instruments can be cash, a contractual right to deliver or receive cash or another type of financial instrument, or evidence of one’s ownership of an entity.

However, when we talk about buying and selling financial instruments, we talk about one of the most beneficial investments one can ever think of. There are plenty of financial instruments available for you when it comes to the types of financial instruments. They can be termed as – cash instruments and derivative instruments.

The values of cash instruments are directly influenced and determined by the markets. These can be securities that are easily transferable. Cash instruments may also be deposits and loans agreed upon by borrowers and lenders.

The value and characteristics of derivative instruments are based on the vehicle’s underlying components, such as assets, interest rates or indices. These can be over-the-counter (OTC) derivatives or exchange-traded derivatives.

There is a list of financial instruments available for you which are typically used by the companies. Here is the list –

  1. Simple bonds – These are bonds issued by companies that represent an effective means of financing. They constitute long-term debts.
  2. Compound bonds – These bonds can be composed of variable interests or rights.
  3. Convertible bonds – When you are a bearer of this bond, you can receive fixed interests and also can become the shareholder of the company to which you are lending according to the conditions stated in the issue contract
  4. Profit participative bonds
  5. Equity Loans
  6. Tracker certificate
  7. PEC or Preferred Equity Certificate
  8. CPEC or Convertible Preferred Equity Certificate

There are a lot of benefits of buying and selling financial instruments and you can be benefited to a great extent. All you need to do is opt for the right financial instrument and turn into the right broker for better help with all the queries you have.

There are plenty of financial groups who can help you with these and help you making the right decision. Make sure you ask all the right questions before making any decisions and you understand what you are up to. Good luck!

Posted in Finance

Let’s Talk about Various Banking Instruments

Banks offer various types of instruments through which the financial transactions can take place. In our daytime day life, one might have experienced use of deposit slip, withdrawal slip or even cheques but there are other types of instruments which banks do use for transactions and among them, some are public instruments which mean, any account holder could use that instrument for financial transactions.

Before going into details of the banking instruments, one should know about two types instruments.

One is negotiable bank instruments and the other one is nonnegotiable bank instruments.

Negotiable instruments are those instruments which can be transferred from one person to another. Since it is negotiable, it can transferable.

Non-negotiable instruments are those instruments which aren’t transferable from one person to the other and hence, they are specific in nature. This s the main difference between negotiable and non-negotiable instruments where one can be transferred and the other one doesn’t give permission to be transferred.

When we talk about negotiable instruments and there are mainly 4 primary types of instruments which serve their own purpose. Those instruments are cheques, bank draft, bill of exchange and promissory notes.

They are characterized by the fact that, they are freely transferable, unconditional, in writing and payable on demand.

On the other hand, the characteristics of nonnegotiable instruments are that it can be transferred. For example, government bonds are a perfect example of non-negotiable bonds. They can only be redeemed by the owner and others cannot redeem it at any cost.

In our daily life, we use one instrument more than the other.  For example, someone will love to deal with cheques but he or she may not be comfortable while dealing with cash. As such, it gives a convenient of not having to carry a lot of money. And since these are written they are generally secured.

Moreover, promissory notes or demand drafts also play a key role in banking instruments. For example, a demand draft guarantees to pay that exact amount to the person/organization whose name is written on the demand draft.

Thus it is the bank instruments which have the power to make economy bigger and more efficient in nature. This kind of instrument plays a pivotal role in the economy. It is these instruments through which transactions can actually take place. Hence, these instruments are the essential part of the financial system of an economy.