IntaCapital Swiss - Beward of Limitations of Collateral Transfer

Beware of Imitations!

Over the last few years, the industry has experienced a major up-turn in the popularity of using ‘leased’ bank guarantees and standby Letters of Credit (and other types of instruments) to secure credit lines, commercial loans and project finance.

Over the last few years, the industry has experienced a major up-turn in the popularity of using ‘leased’ bank guarantees and standby Letters of Credit (and other types of instruments) to secure credit lines, commercial loans and project finance.. However, many borrowers and applicants do not fully understand the concept of these facilities. This gives rise to several unscrupulous operators who entrap their unsuspecting custom through cheap internet sites claiming to offer such facilities, but in reality are incapable.

It is important to understand the bear basics of these types of facilities that are often wrongly grouped in a class labelled as ‘leased securities’. Understanding the terminology will assist you sort the wheat from the chaff when searching for genuine and bona-fide facilities over the internet.

Firstly there is no such thing as a ‘lease’ or ‘leasing’ when it comes to Demand Guarantees (commonly referred to as bank guarantees) or other similar inter-bank undertakings such as SBLC’s (Standby Letters of Credit) or LC’s (Letters of Credit). The correct term is ‘Collateral Transfer’ (or ‘C/T’) where in fact no leasing takes place. It is likely that the word ‘lease’ is used as C/T facilities work in a very similar way since any collaterals injected or invested in this way have to be returned at the end of the term like a lease contract.

Using the internet to search for such facilities is a helpful and easy way to locate providers, lenders and facilitators and to compare what they have to offer. Completing online forms and applications is of course part of our daily routine in the modern, hi-tech society in which we live and can help you to compare quality and attentiveness of any particular provider or facilitator. However, before taking any application beyond that initial enquiry stage our advice is to make contact with them by either telephone or face to face meeting as quickly as possible. Unscrupulous traders will try their best to hide their direct contact details and that should immediately be treated as a red flag. If you cannot speak to them or meet with them, avoid them.

Avoid those web sites that do not provide you full information either about themselves or the services that they offer. Avoid those that are based in strange and obscure offshore locations such as small tax-avoidance islands or unknown financial centres.

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