Wednesday 20 August 2014

A SBLC Is A Legal Alternative To Venture Capital

By Deanne Shepard


There are times when starting a company or expanding an existing one requires a large infusion of capital. One way to get needed funds is to look for venture capital. This is money put up by investors who get a share of the company in return. An alternative to giving up ownership or control is to get a SBLC, which is similar to having a co-signer for a mortgage or a car loan - but on a much grander scale.

The ins and out of domestic and international finance are complex. Banks, pension funds, hedge funds, insurance companies, and other big players in the world of finance move huge amounts of money around. Understanding this process is not really necessary for those who have personal portfolios.

The reputation of the bank or financial entity issuing the Letter of Credit (LC) is the backing for the document. In itself, a LC has no value. The transaction is similar to having a co-signer on a mortgage or a car loan - only on a much larger scale. In both instances, the backer hopes never to be called on to repay a loan or fulfill the terms of a contract.

Only the soundest of companies could persuade a financial entity to back them in this way. Posts online say that this process is used rarely and that it can be a front for scammers. Other websites present opportunities for those seeking financial backing, promising that their experts can make the transaction profitable and safe.

Another term that should be understood is 'private placement'. Securities like stocks, bonds, and/or promissory notes may be offered to selected investors privately, as opposed to a 'public offering' which invites all investors engaged in the market. The securities involved may represent public companies, but the 'invitation only' sale is not regulated by the Securities and Exchange Commission under its general rules.

When things are done on an international scale, it's even more complicated. For example, there is a lot of wealth in the United Arab Emirates, a Middle Eastern country made up of seven emirates (principalities) headed by powerful families. One of the emirates in this federation is Dubai, a name familiar to many of us. Wealth of this kind can invest in private offerings or attract investors to its projects.

The movement of money from buyer to seller or from a contractor to contractor undoubtedly makes the world go round. However, like any other investment, it's possible to lose as well as gain. Anyone or any entity engaging in finance on this scale needs financial wizards to guard their assets.

Unless you have ten million - billion, trillion - dollars to invest, you won't need to worry about a Stand By Letter of Credit. However, if you like following world finance, you may want to learn more about the process. It would make a good plot element for a novel, too. Wily scam artists, rich innocents, and the smart lawyer that saves the day and/or gets a fabulous pay-off: sounds like a bestseller.




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