Financial Instruments

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    Documentary Letter of Credit

    Bank Guarantees

    Factoring

    Documentary Collection

    Services

    Stand by Letter Of Credit

    A guarantee issued by a bank or a financial institution to pay a beneficiary on a client’s behalf in a situation where the applicant defaults, is known as a standby letter of credit. This was developed as a consequence of legal limitation put by the US regulator on the bank’s authority for issuing guarantees.

    A standby letter of credit is considered quite suitable for a wide range of secure payments making it quite a flexible tool. Most commonly, it is used for international trade purposes for providing assurance to the party that it will receive the payment whatever the case it. Having said this, there are quite a few complexities involved in a standby letter of credit. This suggests that it is necessary to have a consultation with an expert in case complete information is not available regarding the procedure.

    There are certain types of a standby letter of credit which are mentioned below:

    • A direct-pay standby
    • A performance standby
    • A bid-bond or tender-bond standby
    • An advance-payment standby
    • A financial standby
    • A counter standby
    • A commercial standby
    • An insurance standby

    PROCEDURE

    Issuance Procedure:

    We need the following documents/ information for finalising the draft –

    1. Filled in application form
    2. Verbiage required in the instrument for SBLC & BG / Pro-Forma Invoice for DLC
    3. Trade license of your company
    4. Share Holders List
    5. Passport copy of main applicant
    6. Last Three years audited balance sheet
    7. Last Six months latest bank statements

    Step-wise

    1. After acquiring all the pertinent documents and information, we will select the issuing bank or financial institution and provide the draft for your review.
    2. Upon receiving the draft of the instrument, you must thoroughly review it with all concerned parties. Should there be any amendment, we can revise it accordingly subject to issuer bank’s policy. Once the draft is approved, send us a copy of the draft with signature and approval stamp.
    3. We will raise the invoice for the agreed charges and you will make the payment against the invoice.
    4. As soon as we receive the payment for the invoice, the issuer will issue and relay the instrument after documentation is completed.
    5. Simultaneously, we will send you the issued copy through email for your reference and record.

    Note: The charges will depend on the value of the Financial Instrument, Tenure, Issuing Bank / Financial Institution.

    Documentary Letter of Credit

    A documentary letter of credit is a guarantee that provides assurance to the beneficiary that he will get the payment which has been mentioned in the documentary letter of credit. There is a condition that the compliant presentation should be under the documentary letter of credit. This documentary letter of credit is commonly used for international transactions where both the buyer and the supplier have a new relationship and operate from different countries.

    A documentary letter of credit is a really crucial financial instrument for meeting the short-term needs. It enables the recipients for obtaining the important credit for financing the project. The recipients hope of getting sufficient return for settling the due amount in the provided time frame.

    The documentary letter of credit showcases the documents and information that are needed by the beneficiary on presentation which includes the expiry information like date and time of the letter. The compliant presentation is a kind of guarantee given to the beneficiary by the documentary letter of credit for in order to get paid. The only criterion is that the delivery conditions should be met.

    It is the responsibility of the bank that writes the letter of credit on the applicant’s behalf to ensure that the terms and conditions which are required for documentation purposes under the credit are met duly before any amount is paid to the supplier. Documentary letter of credits come under the governance of the International Chamber of Commerce (ICC) rules. These rules for the letter of credit are known as Uniform Customs and practice for documentary Credit (UCP). The current version which is in effect is the UCP600 from July 1st, 2007. The concerned parties to a documentary letter of credit are the issuing bank and the beneficiary.

    In these cases the credit worthiness of the issuer stands in place of the credit worthiness of the buyer – giving the supplier greater comfort that he will be paid.

    PROCEDURE

    Issuance Procedure:

    We need the following documents/ information for finalising the draft –

    1. Filled in application form
    2. Verbiage required in the instrument for SBLC & BG / Pro-Forma Invoice for DLC
    3. Trade license of your company
    4. Share Holders List
    5. Passport copy of main applicant
    6. Last Three years audited balance sheet
    7. Last Six months latest bank statements

    Step-wise

    1. After acquiring all the pertinent documents and information, we will select the issuing bank or financial institution and provide the draft for your review.
    2. Upon receiving the draft of the instrument, you must thoroughly review it with all concerned parties. Should there be any amendment, we can revise it accordingly subject to issuer bank’s policy. Once the draft is approved, send us a copy of the draft with signature and approval stamp.
    3. We will raise the invoice for the agreed charges and you will make the payment against the invoice.
    4. As soon as we receive the payment for the invoice, the issuer will issue and relay the instrument after documentation is completed.
    5. Simultaneously, we will send you the issued copy through email for your reference and record.
    Note: The charges will depend on the value of the Financial Instrument, Tenure, Issuing Bank / Financial Institution.

    Bank Guarantees

    A promise made by the bank for meeting the liabilities of a debtor when a person fails to fulfill his contractual obligations. There are two types of bank guarantees — Direct or indirect:

    A direct guarantee is one where a bank is asked to provide a guarantee by its account holder, in favour of the beneficiary.

    In an indirect guarantee, a second bank issues a guarantee in return for an already issued guarantee. When the second bank suffers losses when a claim is made against a guarantee, the issuing bank will make sure that it compensates all the losses.

    Guarantees provide comfort to the beneficiary; in case the applicant fails to meet his obligations (either financially or by performance) as per the contract made between the applicant and the beneficiary, the beneficiary will have the guarantee to turn to for payment.

    Having a guarantee issued in support of a client’s transaction can help the client grow and expand their business by postponing current payments for goods and/or services to a later date, provide comfort to buyers, allow clients to bid on transaction , without requiring that SFC clients tie up their available cash.

    Following are the different bank guarantee types that are available:

    A Bank Guarantee is a versatile tool which can function as a number of instruments: a bid bond, a performance bond, and advanced payment guarantee, a warranty bond, a letter of indemnity, a payment guarantee, a rental guarantee, or a confirmed payment order.

    1. A BID BOND is usually issued for bidders on construction or similar tender based projects. A bid bond is a debt secured by a bidder. In effect, it serves to secure the bidder’s investment in the project and to discourage bidding by less serious players. A bank guarantee could be presented as a partial alternative to the financial capital typically required by a project owner.
    2. A PERFORMANCE BOND, or CONTRACT BOND is utilized in the real estate industry to make sure a contractor completes a designated project. A performance bond is issued by a bank, insurance company or a financial institution in favour of a beneficiary by order of an applicant, against the applicant’s failure to meet its obligations as per an underlying contract. A performance bond often covers 100% of the contract value and can replace a bid bond when the applicant has been awarded a contract. If effect, applicants use performance bonds to comfort suppliers who are concerned with the prospect that the applicant might become insolvent or otherwise unable to fulfil his contractual obligations. In case of insolvency of the applicant, the beneficiary receives compensation that should ease financial stresses or other damages caused by the contractor.
    3. An ADVANCE PAYMENT GUARANTEE, or ADVANCED PAYMENT BOND is an agreement where an issuer undertakes responsibility to return an advanced payment to the buyer, should the seller fail to meet his obligations.
    4. A WARRANTY BOND is a contract between a project/property owner, a contractor, and a surety company. The bond promises that any defects found in the original project will be repaired during the warranty period. Frequently used in the housing and construction sector, a warranty bond guarantees an investor that a contractor will resolve all covenants that relate to materials used and work done before the warranty on the materials expires.
    5. A LETTER OF INDEMNITY is an instrument guaranteeing contractual provisions will be met; otherwise financial reparations will be made. A letter of indemnity is often utilized to request replacements for lost shares from a company’s treasury.
    6. A PAYMENT GUARANTEE provides the supplier with financial security in case the applicant fails to pay for goods or services supplied. Payment guarantees mitigate credit or country risk when the supplier ships the goods on an open account basis, which is to say, before receiving payment. Payment guarantees are typically issued to cover debts in cases of non-payment arising under a transaction or over a period of time. The instrument’s wording is based on the terms outlined in the original debt agreement between the applicant and the beneficiary. The applicant will make a repayment based on these terms. Sometimes a payment guarantee can be backed with collateral, such as property or asset that is pre-approved by the lender.
    7. RENTAL GUARANTEES promise payment to a landlord in case a tenant defaults financially. Since the risk of a tenant defaulting can be extremely harmful to a property owner, rental guarantees are extremely valuable tools which give security to industrial and commercial landlords.
    8. A CONFIRMED PAYMENT ORDER is an irrevocable obligation to pay. In most cases, the confirmed payment order is conditional on successful completion of a project.

    PROCEDURE

    Issuance Procedure:

    We need the following documents/ information for finalising the draft –

    1. Filled in application form
    2. Verbiage required in the instrument for SBLC & BG / Pro-Forma Invoice for DLC
    3. Trade license of your company
    4. Share Holders List
    5. Passport copy of main applicant
    6. Last Three years audited balance sheet
    7. Last Six months latest bank statements

    Step-wise

    1. After acquiring all the pertinent documents and information, we will select the issuing bank or financial institution and provide the draft for your review.
    2. Upon receiving the draft of the instrument, you must thoroughly review it with all concerned parties. Should there be any amendment, we can revise it accordingly subject to issuer bank’s policy. Once the draft is approved, send us a copy of the draft with signature and approval stamp.
    3. We will raise the invoice for the agreed charges and you will make the payment against the invoice.
    4. As soon as we receive the payment for the invoice, the issuer will issue and relay the instrument after documentation is completed.
    5. Simultaneously, we will send you the issued copy through email for your reference and record.

    Note: The charges will depend on the value of the Financial Instrument, Tenure, Issuing Bank / Financial Institution.

    RWA / POF /BCL

    Ready willing and able

    Ready willing and able (RWA) is a document that a bank or a financial institution issues on the clients’ behalf. The document showcases the capability and intent (both financially and legally) for entering into the financial transactions. The RWA’s are also referred to as the bank comfort letters.

    Proof of funds

    Proof of funds is a bank statement or a document that demonstrates that a company or a person has the money to finalize the transaction. The purpose of the document is to ensure that the financial ability that is required for the transaction is legitimate and procurable. The document is mostly used for funding those projects that require a huge amount of money for investing, often for real estate transactions.

    There is a possibility that proof of funds is used by certain people that might carry out financial scams. This makes it necessary to present with a proof of funds for investigating the other party thoroughly and performing diligence checks.

    Bank confirmation letter

    Bank confirmation letter (BCL) is a letter given by a bank or financial institution as a confirmation for a loan and also for a line of credit extended to a borrower. This letter acts as an official surety on behalf of a borrower that a person, organization, or company is eligible for borrowing a certain amount of funds for a specific purpose.

    The bank confirmation letter provides assurance to a third party that the borrower has sufficient financial resources for completing a specific transaction like purchasing goods. Contact the trade finance experts to get the BCL today.

    PROCEDURE

    Issuance Procedure:

    We need the following documents/ information for finalising the draft –

    1. Filled in application form
    2. Verbiage required in the instrument for SBLC & BG / Pro-Forma Invoice for DLC
    3. Trade license of your company
    4. Share Holders List
    5. Passport copy of main applicant
    6. Last Three years audited balance sheet
    7. Last Six months latest bank statements

    Step-wise

    1. After acquiring all the pertinent documents and information, we will select the issuing bank or financial institution and provide the draft for your review.
    2. Upon receiving the draft of the instrument, you must thoroughly review it with all concerned parties. Should there be any amendment, we can revise it accordingly subject to issuer bank’s policy. Once the draft is approved, send us a copy of the draft with signature and approval stamp.
    3. We will raise the invoice for the agreed charges and you will make the payment against the invoice.
    4. As soon as we receive the payment for the invoice, the issuer will issue and relay the instrument after documentation is completed.
    5. Simultaneously, we will send you the issued copy through email for your reference and record.

    Note: The charges will depend on the value of the Financial Instrument, Tenure, Issuing Bank / Financial Institution.

    FACTORING

    Specialized in cross-border transactions and with an emphasis on eliminating trade risk, we help clients for international export factoring. This financial tool helps companies accelerate cash flow, improve collections and control exposure to bad debts. By leveraging your international account receivables, you can count on having immediate access to a source of funds to accommodate your firm’s growth.

    LIST OF  DOCUMENTS REQUIRED

    1. Certificate of Incorporation
    2. Memorandum /Articles of Association & Board Resolution to verify who is the signing authority and can borrow on behalf of the company.
    3. Latest Extract
    4. Copies of Passports for all directors and shareholders
    5. Address confirmation for all shareholders/directors
    6. Address confirmation for Company (Utility or Lease Agreement)
    7. TAX Certificate
    8. Passport size photos for the signatories
    9. Company Profile
    10. Audited Financials for 2 years
    11. Latest Credit Report of Company and Signatories
    12. Buyers list (template provided)
    13. Last Six / Twelve months company bank statements
    14. Proforma Invoice/agreement

    DISBURSEMENT FLOW

    1. Once the shipment is ready, the seller will send the invoice and bill of lading copy via email to the lender and keep the client in copy/cc. The invoice of seller will have the lender’s account details. And there will be a separate invoice on the lender for transfer.
    2. The lender will ask the buyer to endorse the invoice and reply back on the same email where the bank account details are for the lender. Plus they have to transfer the factoring charges to the lender directly.
    3. After the endorsement of the invoice, the lender will request the seller to courier the bill of lading to the buyer. Upon receipt of the tracking number, the lender will disburse the funds to the seller.
    4. On the repayment date, the buyer then will pay the lender for the shipment value.

    Documentary Collection

    SHARVARI is associated with some  issuers which are leading and foremost provider of documentary collection that is a type of trade finance. Under it, an exporter gets paid for the goods provided by an importer once the banks of the two parties exchange the required documents. The bank of the exporter collects the required funds from the importer’s bank. This is done in exchange for documents releasing the title to the merchandise that gets shipped. It happens when the goods are received at the location of the importer.

    We provide documentary collections to all our valued clients. These include as below:

    • Import Collection
    • Export Collection

    Import collection is the collecting institution whereas export collection is the presenting institution. We deliver our services to all our valued clients situated globally. These services are tailor made as per their requirements.

    Flow of Process as Collecting Institution

    1. Onboarding of the company
    2. Rwa via Swift or written confirmation
    3. Documents arrival at issuers counters
    4. Email clients for the documents scan for confirmation of clients
    5. Once the signed bill of exchange is received, Issuers will release documents to the buyer
    6. The instruction of presenting bank
    7. Finally, the payments are collected on maturity for settling the presenting bank

    Flow of Process as Presenting Institution

    1. Onboarding of client
    2. Email or Swift from the collecting bank for willingness for handling the collection
    3. Once the confirmation is done, we will send the courier to the collecting bank with the documents
    4. Payment instruction as per our clients

    On maturity, we will follow up with you for clearing the payments. Once the payments are collected, we will transfer the funds to you.

    Get in touch with our trade finance experts to learn more about our DOCUMENTARY COLLECTION SERVICES and how we will benefit you and your business needs.

    SERVICES

    1. COMMERCIAL RATING

    High-quality credit rating aim to help corporates in two prolonged approaches:

    • To exhibit the corporate’s credit repayment capabilities to the clients and banks
    • Add weightage to companies credibility while dealing in cross-border trad

    2. FINANCIAL RATING

    The outstanding financial rating helps these institutions in several ways:

    • Show the clients how much credit a finance institute has available to grant the clients.
    • To show how strong the financial institution’s collection is to reuse the funds for supporting a maximum number of clients.
    • The rating also benefits the finance firms in standing out among the vast market competition to get audited & rated by ICRA LLC.
    BENEFITS OF RATING:

    1. Better reputation strong brand creation
    2. Marketing tools for the international and local market
    3. Better negotiations with trading partners
    4. Better negotiations with banks on services
    5. One document showing your companies credit profile

    Process:

    1. Client onboarding
    2. Initial documents collection & screening
    3. Invoicing & payment collection
    4. ICRA rating initiation
    5. Rating committee approval
    6. Sharing ICRA rating report & ICRA rating certificate

    Documents Required:
    • Trade License/Certificate of Incorporation
    • Memorandum/Articles of Association
    • Latest extract from online domains
    • Good Standing Certificate for the company from a Local Lawyer in their country
    • Copies of Passports for all directors and shareholders
    • Address confirmation for all shareholders/directors ((Utility bill or Lease Agreement)
    • Address confirmation for Company (Utility bill or Lease Agreement)
    • Board Resolution approving to apply for rating
    • Passport-size photos for all shareholders
    Financial Documents
    • Credit Report of the company and shareholders/directors
    • Audited Financials of the company
    • Latest bank statements of the company (One year)
    • Complete the company’s Business Profile including suppliers, customers, payment terms, number of company staff, banking relationships, and any rewards or certifications.
    • Future business prospects & financial projections