Transfer of collateral is a process where a provider agrees to use his assets for the benefit of a third party; usually the principal or beneficiary. The process is carried out through an agreement of Collateral Transfer. This involves ‘transfer’ of the ‘collateral’ (original asset) into a new security that the Beneficiary can utilize. No wonder, the term “Collateral Transfer” is used.
This is usually done by the provider of the underlying or original asset guaranteeing the asset to the issuing bank to facilitate the provider can easily instruct the Standby Letter of Credit (SBLC) or the Beneficiary and recipient bank or bank guarantee remittance. The results of bank guarantee can be used in any manner the beneficiary wishes. Also the underlying asset guaranteed to issuing bank can be any of the following listed below usually provided by ‘provider’:
– Other assets
The provider may be any private equity or investment group. This may even be a collateral management organization ready to make investments in support of its clients. Usually, the provider receives assets through private label funds, especially arranged for the purpose. It may also be arranged from any of the following:
– Pension funds
– Hedge funds
– Family offices
– High net worth individuals
Most providers are capable of offering good returns to investors on non-liquid assets via offering facilities for collateral transfer. This is certainly a very good opportunity for investors who wish to get additional returns via placing their own assets with the provider. In turn, the provider demands beneficiaries or suitable clients for receiving collateral transfer abilities. Thereafter, the payment made towards contract fees by the beneficiary to the provider for using bank guarantee are categorized amongst the owners (investors) of the original underlying asset in return. Provider will keep a part of this as their management fee. Decent yearly returns are generated on assets by investors in the form of real estates, valuable artworks, stagnant capital, etc.
Provider uses his bank relationship for guaranteeing these assets to Issuing Bank. He will also have the bank issue a Bank Guarantee to the owner (beneficiary) for a specific term (usually twelve months of renewable terms). Here, the beneficiary must pay for a contract fee to the provider for using bank guarantee over the entire term.
Choosing the Best Leased Bank Guarantee Provider:
Take into consideration the following points:
– The partners should be proven, genuine, and authentic providers.
– Always prefer large and reputed financial institutions and bankers holding many years of experience.
– The main experience of these companies should be in the field of funding bank guarantee transactions.
– Most organizations provide highly comprehensive, integrated process of issuing bank guarantee issuing. It is advisable to rely on proven leased bank guarantee providers who issue bank guarantee and monetization program.
– The team of professionals should be well informed and knowledgeable. Make sure these professionals are able to solve all of your queries. Staying more informed will help you stay protected.
– Get in touch with knowledgeable professionals and bank guarantee providers who are ready to provide detailed program overviews of all services.
– Look for providers who have never failed any transaction post signing a contract with customers.
– Research on reviews of customers who are completely satisfied with the services.
– Get in touch with customers who have never complained of a company not performing well.