Public Commentary: The material below outlines FG Capital Advisors’ process for refinancing sight letters of credit. It is provided for informational purposes only and does not constitute investment advice or a solicitation.
Letter-of-Credit Refinancing — Extending Payment Terms Without Disrupting Supply Chains
When suppliers insist on sight LCs but buyers need tenor, an LC-refinancing facility converts immediate-payment obligations into 90–210-day usance terms—freeing working capital while preserving the seller’s payment security. FG Capital Advisors arranges Usance Payable-at-Sight (UPAS) and Usance Payable-at-Presentation (UPAP) structures through first-tier confirming banks, even in higher-risk jurisdictions.
How LC Refinancing Works
- Importer’s local bank issues a sight LC in favour of the exporter.
- FG-arranged confirming bank adds its confirmation and agrees to pay exporter at sight.
- At presentation, confirming bank pays the exporter immediately, discounting the LC.
- Importer repays the confirming bank at the agreed deferred maturity (90–210 days).
- Collateral is limited to assignment of LC proceeds; no additional hard security is usually required.
Indicative Commercial Terms
| Parameter | Typical Range |
|---|---|
| Tenor | 90 – 210 days from B/L date |
| Advance Rate | 100 % of LC face value (net of fees) |
| All-in Cost* | SOFR + 300 – 500 bps, pro-rated for tenor |
| Handling / Arrangement Fee | 0.40 – 0.80 % flat |
| Minimum Ticket | US$3 million per LC or US$10 million programme |
| Collateral | Assignment of LC proceeds; control over shipping documents |
*Pricing varies with issuing-bank rating, country risk, and commodity type.
Eligibility Checklist
- Goods are readily marketable commodities or finished industrial/consumer products.
- LC issued by bank rated BB– or higher, or covered by acceptable risk-participation agreement.
- Importer provides audited financials showing positive EBITDA or strong asset base.
- Transaction is free of sanctions exposure and complies with AML/KYC standards.
20-Day Execution Timeline
Day 1–3 | Initial Submission
– Draft LC, corporate financials, and KYC pack.
Day 4–7 | Indicative Offer
– Confirming bank issues pricing and limit approval.
Day 8–14 | Documentation
– LC wording finalised (UPAS/UPAP clause), facility agreement drafted.
Day 15–18 | Credit Approval
– Internal committees approve; CP checklist circulated.
Day 19–20 | Issuance & Funding
– Confirmed LC transmitted via SWIFT; exporter paid at sight.
Critical Success Factors
- Precise LC Drafting: UPAS language and reimbursement instructions agreed upfront.
- Documentary Compliance: Accurate B/L, packing list, and certificates prevent payment delays.
- FX Consistency: Loan and receivable currency matched to avoid mismatch risk.
Engagement
Importers aiming to convert sight LCs into deferred-payment liquidity are invited to contact FG Capital Advisors. An indicative quote can be provided within three business days of receiving transaction details and corporate credentials.
This document serves informational purposes only. It does not constitute investment advice and should not be interpreted as an offer to buy or sell any security, financial instrument, or service. Independent professional guidance is recommended before acting on any information herein.
