In the dynamic landscape of finance, Bank Guarantees obtained through Collateral Transfer facilities emerge as powerful tools for securing credit lines. Beneficiaries can leverage these guarantees to access lines of credit at their banks, typically up to 100% of the face value, deducting advance interest charges and bank fees. However, lending rates, often falling within the 80% to 90% range of the face value, reflect a prudent approach.
The Guarantees issued under these facilities adhere to ICC758 protocol, earning recognition and acceptance from international and private banks. Commonly referred to as ‘Letters of Guarantee,’ ‘Credit Facilities Guarantees,’ or ‘Standby Letters of Credit,’ these instruments are tailored explicitly to secure credit lines.
It’s crucial to clarify that obtaining a Bank Guarantee through Collateral Transfer has no impact on its quality. The Guarantee, worded under ICC758 standard-approved language, does not include terms like ‘lease.’ The use of ‘leasing’ is a misnomer and doesn’t find a place within these facilities.
While securing credit and loans against the Guarantee is a viable option, it comes with additional costs—interest charges alongside the Contract Fee, the ‘rental’ fee for the Bank Guarantee. International lending rates for loans secured against such high-quality security hover around 3.00% per 12-month term, with variations based on jurisdictions and currencies.
These facilities prove most effective for financial needs with terms under 5 years, or where returns justify higher annual rates. Extending beyond 5 years is discouraged, although feasible, due to a misalignment with the nature of Collateral Transfer facilities.
Redeure stands ready to assist clients in obtaining credit against such guarantees, especially when their primary banks decline lending facilities. With strong relationships with understanding banks and private equity groups, we facilitate expanded lending opportunities. Additional fees apply when utilizing our services to secure credit lines.
For selected clients, Redeure can also directly introduce and open banking and lending facilities with willing banks. Inquiries for detailed quotations are welcome.
The approval for receiving the Bank Guarantee must precede any application for credit against it. Understanding the nuances of these processes ensures a strategic and successful financial approach.