Many times, monetization and sale are confused. Monetization of a bank instrument is getting a loan against that instrument which is used as collateral for the loan. At the end of the loan term, the bank instrument is sent back to the issuing bank or presented for settlement. If the loan has to be repaid by the client, it is a recourse loan, and the client gets use of the proceeds during the loan period, which is generally the same duration as the bank instrument. If the loan does not need to be repaid back by the client at the end of the loan term, it is a non-recourse loan.
If the bank instrument is a Standby Letter of Credit (SBLC), the SBLC must generally cash backed, callable within in one year and one day from issuance, be assignable, and divisible or can be presented for redemptions without additional fees due. Below is a sample monetization contract. Note the procedures required from issuance to monetization. After the monetization the Parties (client and NW Angel Funding) will decide what to do with the proceeds. This includes, project funding, taking proceeds into the private buy sell own your own platform (see that tab), take the proceeds into an institutional outside trade (see tab) or a combination of these alternatives.
Sale goes through all the same procedures as monetization only the bank instrument is sold and transferred to the purchasing party. A contract is done between the client and NW Angel Funding, which is identical to the monetization agreement attached, except there is no loan, the bank instrument is sold.
Note generally monetization or sale will be at a price approximately 20 points over the purchase price of the bank instrument.
