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Would appreciate comments on this Financing

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Would appreciate comments on this Financing  Reply with quote  

We have recently come across a Financial company that is looking to JV with us on a highly profitable and asset secured project. they were shown an opportunity from an associate of ours, and I did not realize the scope of their financial activities but they came back with a proposal to finance the project using an SBLC (Stand By Letter of Credit) transaction. I am not green nor am I ignorant with standard banking and asset based lending transactions so when I saw this I was HIGHLY suspect and it questions to me the legitimacy of the organization. Here is the proposal, I would be interested in comments from those closer associated with the financial, banking, or lending community.

-------Here is the Proposal------------------

Further to our conversation please find the outline for obtaining a Standby Letter of Credit for the purpose of monetization.

I. Agreement is issued

II. Escrow is established with our Lawyer

III. Escrow is funded

IV. Draft SBLC is issued for approval

V. Invoice issued for fees to Your Corp.

VI. Payment is made for the issuance of the SBLC

VII. SBLC is swifted via MT760 to Lender

VIII. Lender clears instrument through compliance and ascertains the commercial purpose

IX. Funding Agreement issued to Your Corp. with terms and conditions
Outline of Fees to be paid by you:

1 Million SBLC (70% LTV / $700,000.00)
- $70,000.00USD upfront Fee
- $20,000.00USD Administration Fee (which includes legal fees)
- $610,000.00USD Retained by client for Investment

2 Million SBLC (70% LTV / $1,400.00)
- $140,000.00USD upfront Fee
- $40,000.00USD Administration Fee
- $1,220.00USD Retained by client for Investment

4 Million SBLC (70% LTV / $2,800.00 )
- $280,000.00USD upfront Fee
- $80,000.00USD Administration Fee
- $2,440.00USD Retained by client for Investment

5 Million SBLC (70% LTV / $3,500.00)
- $350,000.00USD upfront Fee
- $100,000.00USD Administration Fee
- $3,050.00USD Retained by client for Investment

**A further 7% backend fee will be deducted from the final retained amounts. This Fee will be payable to the SBLC provider. The carry cost of the funding is libor+3.

*** If the instrument obtained by Your Corp. is higher then 10M broker will retain 10% of the corporate asset until the repayment of funds within 18months at which time the shares revert back to your corp. This repayment figure will have to be discussed and agreed upon.


From subsequent discussions, they expect $450K in up front fees and "don't worry the financial backers we deal with are strong we get the money". Not much more than that.

The party offered to JV with them and they cover the up front financing and SBLC financing, they weren't interested, they wanted the up front fees to secure the financing.

I have friends in the financial industry and I have heard of SBLC before and all associated comments were negative. It was pointed out that financing an SBLC is not used for investment purposes, and that this has the look of a standard Advance fee fraud senario where a potential client puts the money up front for fees to secure a loan, but the financing never occurs. Ooops, sorry the fees were used up and the broker stops returning phone calls.

My question is has ANYONE ever heard of this sort of financing working out successfully ? All I've ever heard of is that they are always a dead end with clients always losing their upfront fees.

What surprises me is that the corporation is in a financial tower and very "forward" about their activity. You would think that they would be well publicized as scamming people if it was an advance fee scheme.

As a policy we never pay up front for financing and are not entertaining this, I wanted to hear from some people if this sort of thing can have ANY sense of legitimacy.

Post Tue Jan 24, 2012 6:09 pm
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Forget about it, the moment I hear of SBLC, I smell fee scam, and I have seen tons of these deals never get funded, while your upfront fees are never to be returned, so I would not entertain this offer if I was you.

Success to all,

Post Tue Jan 24, 2012 7:59 pm
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Back in the early 1990s, a similar company here
was raided by Feds and they all went to prison.
Quick read, and this may give you some direction.

Value Investments Ltd, Baton Rouge, LA
Newspaper Articles on the Bust

S.M.A.R.T. Marketing Inc., Mortgage Services N.A. Ltd

Post Wed Jan 25, 2012 5:07 pm
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I took some search about it and saw several post that the proposal is indeed a scam. Some businesses who had paid their upfront fees didn't get it back when they are the one who needs it.
Post Tue Mar 13, 2012 3:15 am
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SBLC  Reply with quote  

If you view the SEC and FBI websites, both very clearly state that SBLC deals are fraud.
Post Sun Feb 03, 2013 11:30 pm
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