How to Get a Letter of Credit from a Top Rated Bank and Raise Private Capital if You Lack Collateral

Important. For importers, exporters and commodity traders seeking bank-issued letters of credit. Not investment advice. Prepared September 2025.

How to Get a Letter of Credit from a Top-Rated Bank and Raise Private Capital if You Lack Collateral

1. Understand What a First-Tier Bank Will Ask For

Global banks (JPMorgan, Citi, HSBC, BNP and peers) remain the benchmark issuers of letters of credit (LCs). In 2025, expect detailed checks on:

  • KYC/AML: full ownership chart, sanctions screening and trading history.
  • Financial strength: audited statements, net worth, cash-flow coverage and leverage ratios.
  • Collateral and security: typically a cash margin or equivalent pledged assets.
  • Clean trade documentation: purchase orders, invoices, shipping contracts, inspection certificates.

Arriving with a complete and verified file accelerates approvals and strengthens your negotiating position on collateral.

2. Reduce or Replace Cash Collateral

Borrowing Base or Inventory Facilities

Use bonded stock and eligible receivables as collateral. Banks will advance 60–80 % of value and reduce or waive cash cover for the LC.

Receivables Discounting

Assign insured export receivables. Recognized receivables can offset the cash margin almost entirely.

Standby LC or APG Backing

A standby letter of credit or advance payment guarantee from a strong counterparty serves as substitute collateral.

Parent or Cross-Corporate Guarantees

A well-capitalized affiliate can pledge guarantees to lower or replace the required cash deposit.

3. Raise Private Capital When Collateral Falls Short

If banks still require more security than you can provide, consider raising private capital to meet the gap:

Equity Injection

Bring in equity investors who take a minority stake in return for a share of profits or a defined exit at maturity of the LC facility.

Mezzanine or Unitranche Loans

Arrange subordinated or hybrid debt at the holding company level. Proceeds can be pledged as cash margin for the LC.

Receivables Securitization

Package confirmed export receivables into a rated SPV. Advance from the SPV can be used as LC collateral.

Pre-payment or Offtake Finance

Negotiate pre-payments from long-term buyers. These upfront funds can be pledged as security for the bank LC.

4. Execute the LC Application

  1. Negotiate LC terms with your supplier or buyer (amount, expiry, documents required).
  2. Apply to your chosen top-rated bank or through an arranger like FG Capital Advisors.
  3. Undergo credit and compliance checks; pledge the agreed mix of cash and alternative collateral.
  4. The issuing bank releases the LC, confirmed if required, to the beneficiary.

For well-prepared applications the process typically takes two to six weeks from submission to issuance.

Need Help Securing a Bank LC or Raising Private Capital?

FG Capital Advisors structures borrowing-base facilities, SBLC or APG backstops, and private-credit injections to help you meet bank requirements and cut the cash margin. Discuss your trade cycle with us today.

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Disclaimer. All facilities are subject to full underwriting, legal documentation and KYC/AML. FG Capital Advisors does not guarantee funding. Third-party costs and bank charges are separate from our fees.