Why are funding instruments providers so hard to find?
Issuing BGs and SBLC requires a very specialist financial skillset. Therefore, there are very few genuine BG or SBLC providers, and most high net worth investors do not have the expertise and time to involve themselves with the issuing process of the bank instrument.
It is a reality that you need the bank instruments providers much more than they need you. Genuine providers are very selective with who they choose to do business with as they have more clients than they need.
High net worth corporations are usually bank instrument providers who have other ways of investments available.
As the monetizer fails to perform as per transaction procedures, 80% of BGs and SBLCs that provide deliveries to third party’s monetizers fail.
The bank instrument world has many investors having no idea about how a band instrument works and what it is for and mistakenly believe that the BGs and SBLCs have no upfront fees.
What is the purchase of a bank instrument such as BG or SBLC?
When a buyer purchases a bank instrument from a provider, it means that the buyer can cash the instrument at the end of the year for the full-face value.
How can a provider sell an SBLC or BG for 50% of its face value?
When a provider sells a bank instrument it is because they have a financial strategy that is well thought out via different trading programs or platforms that, with the cash received from the sale of the bank instrument, they can reinvest the cash for the full year in the commodity market and will, in turn, pay for the bank instrument itself, and during this process, they will also make money.
For example, let’s say you purchase a BG or SBLC from AltFunds Global with $100 million face value to be cashed in one year, and one day, you will pay $50 million to the company in cash. The company will deliver to you the purchased owned BG or SBLC. At the end of the year (1 year and 1 day), you will double your money 100% guaranteed by the bank instrument. However, in the meantime, once the funds are received from the buyer on day one, AltFunds Global will place that $50 million into the trade market generating at least 10% (more or less) of profit each time they invest the funds.
AltFunds Global will get into a partnership agreement (PA)with a trading platform that has, for example, a pre-arrangement with a “Salt Wit” to deliver one container of salt per week for the full year, and each container will give them 10% of profit. Each year has 52 weeks, meaning that when you take that 10% and multiply it for 52 weeks that a year has, the total profit (TP) will be 520% ($260,000,000 million) of the funds received by the buyer, giving AltFunds Global enough funds to pay 100% of the face value of the bank instrument sold to the client and a lot of profit left over to split between them and the trading platform (PA).
What part do banks play in BG / SBLC transactions?
The bank is not the initiator, but the deliverer of the transaction. What this means is that the bank is the deliverer, not the initiator of the transaction – they confirm their client has sufficient funds. The bank is just the delivery courier who works for the BG and SBLC provider, the actual asset owner, asset holder, or asset manager.
For example, let’s pretend you use a courier to deliver a parcel to a customer. You are the provider of the parcel, and the courier is the delivery agent who delivers your parcel to the receiver. The courier isn’t the provider of the parcel. They are just the delivery agent whom the provider uses to send the parcel from the provider’s location to the receiver’s location.
Using the illustration above, banks treat Bank Guarantees and Standby Letters of Credit the same way. The bank serves as the courier and receives a financial order from a supplier to send to the receiver’s bank one of the providers’ assets (BG or SBLC). In other terms, the banks are instead of the courier, becoming the most widely known MT messages as the sender and recipient of SWIFT messages. (If its MT760, MT799, and so on). Apart from receiving fees for “cutting” (initiating) and “delivering” the bank instrument, the bank holds no interest in the transaction. As the financial instrument was launched and secured since then against the cash position in the bank account of the provider at the issuing bank, all other responsibility for the asset is theirs.