Starting a business or expanding it to reach global markets takes vast amounts of capital. Venture capitalists can provide this kind of financial backing, but part-ownership of the company is demanded in return, usually in the form of shares of stock in the company. Those who wish to get working capital but want to retain ownership and control can seek a SBLC, a pledge of repayment to the lender if the principal defaults.
A Stand By Letter of Credit is part of high finance, far beyond the scope of most investors. This kind of document is used by banks, insurance companies, hedge funds, pension funds, and other big players. Huge amounts of money are moved around by these financial institutions. The process might affect the portfolios of the average investor, but understanding the transactions is not really necessary.
The acronym designates a Stand By Letter of Credit. This is a document issued by a treasury of funds - a bank, for instance - which guarantees repayment of a loan or the default penalty of a contract. The document itself is worthless; it's the credibility of the bank or other institution that is the security.
Of course, no bank will issue such a thing without complete faith in the client. Some sources say that such a document is used rarely. In fact, they claim than even the mention of such a Letter of Credit is a red flag signalling 'Investors beware'. Other information promises that expert advice can make this kind of transaction safe and profitable.
'Private placement' should also be understood. This refers to an offering of stock, bonds, or promissory notes to private investors, even though the securities are in public companies. This is a whole aspect of investing that many may never have heard of. A thorough knowledge of what is entailed is essential for those who have enough money to be on the receiving end of such offers.
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 high finance of very rich individuals, nations, or organizations makes the financial world go round. Like all investments, there is risk as well as reward. The Letter of Credit (LC) is not meant to be used; it's a 'last resort' pledge to repay or fulfill contractual obligations that gives a company the scope to work and succeed. Often success requires an initial infusion of funds long before significant returns are realized.
Of course, this is all academic unless you have ten million dollars or more to invest or need that much or more. Those of us who deal in hundreds and thousands will never need a LC. However, it's fun to learn more about this shadowy world - maybe for a novel about a financial struggle on an international scale, where it's hard to tell the good guys from the bad.
A Stand By Letter of Credit is part of high finance, far beyond the scope of most investors. This kind of document is used by banks, insurance companies, hedge funds, pension funds, and other big players. Huge amounts of money are moved around by these financial institutions. The process might affect the portfolios of the average investor, but understanding the transactions is not really necessary.
The acronym designates a Stand By Letter of Credit. This is a document issued by a treasury of funds - a bank, for instance - which guarantees repayment of a loan or the default penalty of a contract. The document itself is worthless; it's the credibility of the bank or other institution that is the security.
Of course, no bank will issue such a thing without complete faith in the client. Some sources say that such a document is used rarely. In fact, they claim than even the mention of such a Letter of Credit is a red flag signalling 'Investors beware'. Other information promises that expert advice can make this kind of transaction safe and profitable.
'Private placement' should also be understood. This refers to an offering of stock, bonds, or promissory notes to private investors, even though the securities are in public companies. This is a whole aspect of investing that many may never have heard of. A thorough knowledge of what is entailed is essential for those who have enough money to be on the receiving end of such offers.
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 high finance of very rich individuals, nations, or organizations makes the financial world go round. Like all investments, there is risk as well as reward. The Letter of Credit (LC) is not meant to be used; it's a 'last resort' pledge to repay or fulfill contractual obligations that gives a company the scope to work and succeed. Often success requires an initial infusion of funds long before significant returns are realized.
Of course, this is all academic unless you have ten million dollars or more to invest or need that much or more. Those of us who deal in hundreds and thousands will never need a LC. However, it's fun to learn more about this shadowy world - maybe for a novel about a financial struggle on an international scale, where it's hard to tell the good guys from the bad.