It's unfortunate that we still need to address this, but the sheer volume of misinformation online about letters of credit, particularly the myth that they can be obtained for free, is overwhelming.

The typical pitch involves a joker broker—often using a Gmail account and with no formal finance qualifications—reaching out to banks, law firms, NBFCs, and his own network, claiming to have a buyer who can receive billions in SBLCs.

The broker claims the issuer, who does have the liquidity backing the SBLC, must first send an MT799 or MT199 SWIFT message. Only then, the broker's so-called buyer promises to issue a "BPU" as a payment guarantee, without paying anything upfront.

This whole scheme collapses when you consider what’s actually required for a letter of credit to be issued. The issuer with liquidity is tying up their capital, and the opportunity cost is immense.

No one with $50 million in liquidity—whether in cash or a line of credit—at a reputable institution like Barclays would immobilize their assets by issuing a Standby Letter of Credit (SBLC) just to receive $20 million in return. It’s financial lunacy.

Even if the issuer is working with a line of credit, it comes with strict covenants that likely prevent transferring the SBLC to third parties, except for clearly defined and legitimate trade transactions. This isn't a free-for-all. These instruments are heavily regulated and scrutinized, particularly for high-value deals.

Anyone can technically receive a letter of credit and pay a discounted amount against it, but no rational party would willingly engage in such a lopsided deal. The broker’s pitch of receiving billions in SBLCs without an upfront payment not only defies logic, but also betrays a deep misunderstanding of how real trade finance works.

There are legitimate ways to obtain letters of credit, but they always serve a valid business purpose. This could be through your corporate bank account, either with a secured or unsecured SBLC, or by raising liquidity from a third party in exchange for yield—depending on the specific need for the SBLC. What these brokers are chasing is nothing more than a unicorn. Obtaining an SBLC purely for the sake of "monetizing" it is complete nonsense. There's no legitimate business case for it.

Often, their real aim is to lure people into so-called "private placement programs" (PPPs). It’s a tangled web of lies, with no real substance behind it. If someone approaches you with phrases like "a big buyer," "BPU," "private placement program," or "SBLC program," claiming there’s a way to print money out of thin air with no legitimate transaction involved—just ignore them. It’s a scam, pure and simple. Real trade finance involves serious institutions, due diligence, and credible underlying transactions. Anything outside of that is a red flag.

For a legitimate case, let’s consider a company developing a solar project that needs an SBLC as a performance guarantee to secure financing. The company would approach their bank with a business case, project documentation, and collateral, such as assets or cash deposits. The bank would conduct due diligence on the project and, if satisfied, issue the SBLC against the provided collateral. Fees for this service typically range from 1% to 2% of the SBLC value annually, depending on the bank and the risk profile. Collateral requirements can vary but usually include a percentage of the SBLC value in cash or assets, and the terms would include strict covenants requiring the SBLC to be used solely for the intended project. Failure to meet these covenants can result in immediate forfeiture or recall.

Now, for the procurement of commodities overseas, a legitimate buyer would work with their corporate bank to issue a letter of credit (LC) to the seller as a payment guarantee. This would require the buyer to provide either full or partial collateral, typically in the form of cash or a line of credit. The bank would also impose covenants ensuring that the LC is used exclusively for the commodity transaction, and fees could range from 0.5% to 1.5% of the transaction amount, depending on the creditworthiness of the buyer and the transaction risk. Both cases involve real transactions, vetted by banks, and backed by actual assets or cash—unlike the fantasy scenarios promoted by joker brokers.

At Financely, we provide full-scope advisory services for letters of credit, whether you’re securing one for a major project or a commodity trade. Our team ensures you get the right structure, guidance, and support for your transactions. To learn more or request a quote, contact us directly and take the next step with confidence.