Leasing Bank Instruments – Possibilities and Problems

Coming out of such a serious recession, lenders are naturally skittish about doling out cash for commercial projects. The difficulty in getting a loan has lead to an opportunity for investors. Company owners can find the funding they need by leasing out bank instruments they already own to monetizing companies. Specialty financial companies that are these instruments do so through acquiring the instruments at discounted prices. A financial instrument that is gained for less than the face value is considered leased. The benefit is made clear in understanding how these instruments can be used.

They can be used as collateral for a loan, added to holdings to increase credit, or used as a bonding reassurance. The investor in the bargain bank instruments can then lease out the instruments for a fee or profit. This can be done short term and repeatedly for a nice profit using these instruments. Different investment companies specialize in different types of instruments. However, most are involved in leasing them in several forms. Forms of instruments may include safekeeping receipts, certificates of deposit, bank guarantees, stand by letters of credit, and more. These are usually issued to businesses and are valued at or above $100 million.

Be careful! Individuals leasing these instruments are often scam artists. They may promise that you can use a leased instrument in private placement programs or collateral for loans. The major scam comes in when you cannot find someone who will accept a leased bank instrument as collateral or proof of funds. They run a check and find out the instrument does not actually belong to you. Then they refuse to provide the loan or accept the instrument as a demonstration of funds. IN the leasing agreement, the owner of the instrument and the broker are protected. However, the leaser usually is required to pay the fees up front. Those fees will be retained whether or not they can find a use for the instrument.

If you cannot find someone who will accept leased bank instruments, you are out the time, opportunity, and fee money. You return the instrument to the broker or owner. They are richer for leasing these instruments to you, and you are left in the lurch. However, if you are the instrument owner or broker and you follow legal guidelines, this can be a very profitable business for you.

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