Many mistakenly believe Collateral Trasnfer is a Leased Bank Guarantee, but a popular definition is where two companies enter into an agreement that one company, (The Provider), will lend the other company, (The Beneficiary), an asset or financial instrument, usually a Demand Bank Guarantee, for a temporary period of time, and at the end of the that period the ownership of the asset will revert to the Provider.
The contract is referred to as the Collateral Transfer Agreement, and once the Provider’s bank (The Issuing Bank) and the Beneficiary’s bank, (The Receiving Bank), have successfully completed their due diligence, the Beneficiary will pay the Provider a Contract Fee, representing the use of the Bank Guarantee. The Issuing Bank will transfer the Demand Bank Guarantee by SWIFT, (“Society for Worldwide Interbank Financial Telecommunications”), using the dedicated code MT 760, for transmitting Letters of Credit and Bank Guarantees.
Collateral Transfer as the wording denotes provides for the transfer of collateral, using the Collateral Transfer Agreement, whereas the verbiage of the Demand Bank Guarantee, which is governed by ICC Uniform Rules for Demand Guarantees, (URDG 758), provides for the utilisation of the Bank Guarantee by the Beneficiary. In most cases the Beneficiary will use the Bank Guarantee as security to apply for bank loans or credit lines, alluded to as Credit Guarantee Facilities.
There are numerous Providers of collateral, Sovereign Wealth Funds, Hedge Funds and Larger Family Offices, to name but a few. IntaCapital Swiss, have negotiated downwards the fees for collateral charged by the Providers, thus opening up this market to smaller companies.
Collateral Transfer is proving to be the saviour for many companies who are being refused credit facilities by their banks and other financial institutions. IntaCapital Swiss, utilising Collateral Transfer and their ground breaking Facilities, can give large, medium and smaller companies access to Credit Guarantee Facilities such as loans and lines of credit.