Raising Lines of Credit

A bank typically will have no objection to offering credit against a Bank Guarantee which is received under Collateral Transfer facilities.

What is a Line of Credit?

A Line of Credit is a pre-set amount of borrowing which can be used at any time and secured against an asset or security. Once the money is repaid, it can then be borrowed again, in the case of an open Line of Credit. This is sometimes referred to as a ‘cheque book’ facility. A Line of Credit has built-in flexibility, which is the main advantage. Whilst an open-end credit facility has the advantage of being flexible, it has the disadvantage of high interest rates and large penalties for late payments or potential overspend.

What is a Secure Line of Credit?

A secure Line of Credit is guaranteed by a collateral asset of the business, for example through business/company shares or assets. This collateral is monetised in order to facilitate a secure Line of Credit with a bank. Monetisation is the process of converting or establishing an asset into legal tender. If this credit is then unpaid, The lender will take control of the original collateral put forward as security, in this example the company shares or assets, which can then be sold or used to recoup any losses.

What does it mean to Raise a Line of Credit?

Bank Guarantees that are received under Collateral Transfer facilities can be used by the recipient to secure Lines of Credit at a bank. A bank typically will have no objection to offering credit against a Bank Guarantee which is received in this manner. Lending can be up to 100% of face value, less the advance of interest charged, and bank fees associated. However, typical lending rates are presumed to be between 70-80% of face value.

What fees apply when Raising a Line of Credit?

When applying for a Guarantee to secure Lines of Credit and loans, interest charges will apply in addition to the Contract Fee, which is for the rental fee of the Bank Guarantee. In our experience, international bank lending rates for loans secured against high-quality security, tend to be in the region of 3% per 12-month term, possibly more. This cost will differ depending on jurisdictions and currencies.

These facilities suit financial requirements for terms under 5 years or where returns are high, allowing higher expenditure on annual rates. The longer the term, the less suited Collateral Transfer facilities are and therefore we discourage terms in excess of 5 years, although they are achievable.

How can IntaCapital Swiss facilitate?

IntaCapital Swiss can assist its clients in raising credit against Guarantees of this type in the event that our client’s own bank declines to offer lending facilities. We hold strong relationships with understanding banks and private equity groups holding an appetite to expand lending opportunities in this area. It should be noted however that additional fees will apply if you utilise our services to obtain Credit Lines.

Apply with IntaCapital Swiss

To find out more information about Collateral Transfer or to apply via IntaCapital Swiss, please get in contact with an expert to discuss your requirements. Alternatively, please apply using our Application Enquiry Service to submit your details.

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