Complete Guide to SBLC via BPU: Process, Banks, and Fees
Introduction: A Standby Letter of Credit (SBLC) via Bank Payment Undertaking (BPU) is a financial instrument widely used in international trade. It provides security to sellers, assures buyers’ credibility, and mitigates transaction risk. Fully cash-backed and transferable, an SBLC via BPU can be leased for short-term projects or purchased for long-term investments. In this guide, we’ll explore the entire SBLC issuance process, requirements, bank options, fees, timelines, and practical FAQs to help businesses navigate this powerful instrument.
1. What is an SBLC and How BPU Works
An SBLC is a bank’s guarantee that payment will be made to the beneficiary if the applicant defaults. The BPU framework allows top-tier banks to issue SBLCs in a fully cash-backed manner. This system provides several key advantages:
- Irrevocable and unconditional: The SBLC cannot be canceled without agreement from all parties.
- Transferable and assignable: Beneficiaries can transfer the SBLC to a third party if needed.
- Divisible: Payments can be made in parts rather than a lump sum.
- Top-bank backed: Only top 100 banks in Europe, the US, Hong Kong, and Singapore qualify.
Example Use Case:
A construction company in Europe requires proof of funds to secure a contract in Asia. By using a $100M SBLC via BPU, the company demonstrates credibility without liquidating cash reserves. The SBLC can be leased for the contract duration, with the issuing bank guaranteeing payment if the company defaults.
2. Pre-Issuance Requirements
Before issuing an SBLC, BPU requires several documents to ensure compliance, identity verification, and financial capacity:
Corporate Information Sheet (CIS)
- Company registration certificate
- Passport copy of authorized signatory
- Receiving bank account details (must match BPU account)
- Company seal and signature on all documents
Bank Officer Verification
- Original business card (scan with visible contact details)
- Signed authorization letter from the bank officer
Proof of Funds (POF)
- Accepted forms: Recent bank statement (<7 days), BCL, or RWA
- Verification: Officer emails POF to the requesting party or directly to BPU
- Timeline: Verification usually completed within 2 banking days
3. Lease vs Purchased SBLC
SBLCs can either be leased for temporary use or purchased for longer-term investments. Understanding the differences helps determine cost-effectiveness and project suitability.
Lease SBLC
- Fees: 12% provider + 2% intermediary
- Timeline: 15–18 banking days
- Maturity claim: Issuing bank withdraws funds
- Use case: Short-term projects, temporary proof of funds
Purchased SBLC
- Fees: 45% provider + 2% intermediary
- Timeline: 18–21 banking days
- Maturity claim: Receiving bank claims at maturity
- Use case: Long-term asset purchases, permanent funding guarantee
Comparison Table:
| Feature | Lease | Purchase |
|---|---|---|
| Fee | 12% + 2% | 45% + 2% |
| Timeline | 15–18 days | 18–21 days |
| Maturity Claim | Issuer withdraws | Receiver claims |
| Use Case | Short-term | Long-term |
4. Top Banks for SBLC Issuance
Only top international banks are accepted for BPU issuance. Working with these banks ensures credibility, fast approval, and compliance:
- Deutsche Bank AG (Germany) – DEUTDEFF
- HSBC (London) – HSBCHKHH
- Barclays Bank PLC (London) – BARCGB22
- UBS AG (Switzerland) – UBSWCHZH80A
- BNP Paribas (France) – BNPAFRPP
- Citibank N.A. (USA) – CITIUS33
- JPMorgan Chase Bank, N.A. (USA) – CHASUS33
5. SBLC Issuance Process Step-by-Step
- Execute the DOA and submit with POF to info@nnrvtradepartners.com
- Due diligence and countersignature by both parties
- RWA verification within 2 banking days via B2B email
- Pre-advice MT799 issued within 5 banking days post-RWA authentication
- BPU confirmation via MT799 within 3 banking days post-pre-advice
- SBLC issuance MT760 within 3 banking days of BPU authentication
- Post-issuance fee payment via MT103 or wire transfer
- Courier delivery of hard copy within 7 banking days
6. Risk Management and Compliance
All SBLCs are subject to KYC, AML, and sanctions screening. Mandatory compliance ensures the credibility of the instrument and prevents misuse in illegal activities. Businesses must carefully prepare documentation to avoid delays.
7. FAQs (10 Questions)
Q1: What face values are available?
A: Typically USD 100M–500M, fully cash-backed.
Q2: Which banks are accepted?
A: Top 100 banks in EU, US, Hong Kong, and Singapore.
Q3: Can SBLC be transferred?
A: Yes, all BPU SBLCs are transferable.
Q4: How long does issuance take?
A: 15–21 banking days depending on lease/purchase.
Q5: What fees apply?
A: Lease: 12% + 2%, Purchase: 45% + 2% post-issuance.
Q6: Can crypto be used as POF?
A: No, only verified bank documents.
Q7: What SWIFT messages are used?
A: MT799, MT760, MT199 for RWA/POF verification.
Q8: Is SBLC legally binding?
A: Yes, it is irrevocable and enforceable under international banking standards.
Q9: Can a third party receive the SBLC?
A: Yes, BPU allows assignment and transfer.
Q10: What happens if issuer defaults?
A: BPU mechanism ensures the issuing bank covers the guarantee.
Conclusion
SBLC via BPU is a secure, flexible, and fully cash-backed instrument for global trade. By understanding lease vs purchased options, top banks, pre-issuance requirements, and compliance rules, businesses can confidently use SBLC to protect and expand international transactions. Working with reputable banks and following the step-by-step process ensures reliability and smooth execution.