The SBLC Deal Process, Step by Step

Most explanations of how a standby letter of credit deal works are either bank-side textbook theory or broker-side hand-waving. This is the version that reflects how these deals actually run in the cross-border, broker-and-mandate world — the sequence of documents and checkpoints a deal moves through from first contact to issued instrument. See our SBLC / MT760 page for the instrument itself.

If you understand this sequence, two things follow. You'll know where you are in any deal at a glance, and you'll recognise instantly when a counterparty tries to skip a step or do them out of order — which is one of the clearest signals that something is wrong.

A note before the steps: order is the whole point

The single most important thing about the SBLC deal process is that the steps are sequential and non-negotiable. Each one exists to make the next one safe. Verify identity before you reveal terms. Lock the fee before you build the bank package. Get the bank package right before anything touches SWIFT. When someone proposes jumping ahead — "let's sort the IMFPA later, just send the KYC now" — they're not saving time. They're removing a protection, and that's exactly when brokers get circumvented and principals get exposed.

With that established, here's the canonical flow.

Step 1 — NCNDA (lock the relationship)

The deal opens with a Non-Circumvention, Non-Disclosure Agreement. Before anyone shares counterparty identities or deal specifics, the parties agree not to bypass each other and not to disclose what they're about to learn.

This comes first for a reason: everything afterward involves revealing information that can't be un-revealed. The NCNDA is the precondition for disclosure. (Its real-world strengths and limits are covered in NCNDA explained: does it actually stop circumvention?) In a sound process, this is also where the introduction chain — who connected whom — gets recorded, because that record is what protects the brokers later.

Step 2 — KYC / CIS (verify everyone)

Next, every party completes Know Your Customer / Client Information Sheet verification. Corporate documents, beneficial ownership, passports, proof of funds, sanctions screening.

This is the compliance backbone of the entire deal, and it's where the informal process does the most damage. KYC packages get emailed around freely, breaching confidentiality, exposing principals, and sometimes voiding the deal under AML rules. Done correctly, identity is verified once, held securely, and revealed to counterparties only as a verified status — not forwarded as raw files. Get this wrong and nothing downstream is safe.

Step 3 — DOA (define the deal)

The Deed of Agreement (or equivalent transaction agreement) sets out the commercial terms between the principals: what's being secured, the amounts, the structure, the obligations on each side. This is the substance of the underlying transaction the SBLC will support.

A fraud note here: banks issue and confirm their own instruments, but they do not endorse a DOA or a private contract between counterparties. Any document claiming a bank has "endorsed" the DOA is a red flag, not a reassurance — a point worth remembering, covered further in how to spot a fake SBLC.

Step 4 — IMFPA (lock the commissions)

Now — and critically, before the bank stage — the Irrevocable Master Fee Protection Agreement locks the commission structure. Each intermediary's share is fixed, tied to their verified identity and banking coordinates, with the paymaster instructed to pay accordingly.

The placement of this step is everything. Locking the fee before the deal advances to the bank package is what stops principals from progressing the transaction while leaving the brokers' compensation "to be resolved later" — which, in practice, means never. We break down why this matters in what is an IMFPA, and does it protect your commission?. Once signed, the split should be immutable.

Step 5 — Term Sheet (agree the instrument terms)

With parties verified, the deal defined, and fees locked, the term sheet sets out the specific terms of the instrument to be issued: face value, tenor, currency, the issuing and advising banks, the governing rules (ISP98 for a standby, or UCP 600 / URDG 758 depending on structure), and the conditions for drawing.

This is where precision starts to matter at the bank level. The term sheet is the bridge between the commercial deal and the bankable instrument, and ambiguity here becomes rejection later.

Step 6 — Bank Package (assemble for submission)

The bank package is the complete, correctly sequenced set of documents the issuing bank needs to act: the verified KYC, the agreement, the term sheet, the instrument draft, and supporting documentation, assembled in the format and order the bank expects.

This is where real deals most often die on a technicality. Banks reject incomplete, out-of-sequence, or sloppily formatted packages — fast, and often without a second chance, especially given how much fraud they see in this exact instrument category. A clean package is the difference between issuance and a bounce. (See why trade finance deals fall apart for how common this failure is.)

Step 7 — SWIFT Issuance (MT760 / MT700)

The issuing bank, having completed its own credit approval, compliance, and conditions precedent, transmits the instrument over SWIFT — an MT760 for a standby letter of credit, or in some structures an MT700, depending on the instrument and the bank's systems. (The distinction is explained in MT760 vs MT700.)

Two things to hold onto here. First, this is a bank-to-bank transmission — a real instrument arrives through SWIFT between banks, not as a PDF in your inbox. Second, this step only happens after everything before it is genuinely complete; a counterparty waving around an "MT760" before KYC, fees, and the bank package are done is showing you a prop, not an instrument.

Step 8 — Closed (settle and pay out)

The instrument is issued and operative. The underlying transaction proceeds; final settlement runs (often an MT103 for the closing wire). And the commission locked back at Step 4 is released by the paymaster to each verified beneficiary, simultaneously and according to the agreed split.

A deal that reaches a clean close did so because every prior step was done properly and in order — which is precisely why the sequence is non-negotiable.

What the sequence protects against

Read top to bottom, the logic is airtight: verify before you disclose (Steps 1–2), define before you commit (Step 3), lock fees before you build (Step 4), agree terms before you submit (Step 5), assemble correctly before you transmit (Step 6), issue bank-to-bank (Step 7), settle and pay (Step 8). Every step makes the next one safe. Skip or reorder one, and you've opened the exact gap that circumvention, leaks, or rejection walk through.

Running the process without the chaos

Knowing the sequence is one thing. Enforcing it across multiple parties in multiple countries, over email and messaging apps, is another — and that gap is where the process breaks even when everyone knows the steps.

Dealexus turns this sequence into an enforced workflow. The platform locks the deal into exactly this lifecycle — NCNDA, KYC, DOA, IMFPA, term sheet, bank package, SWIFT, closed — so steps can't be skipped or reordered, KYC is verified once and disclosed selectively, the IMFPA is locked before the bank stage, and the bank package is assembled correctly before it reaches a bank officer. The process stops depending on everyone remembering to do it right.

Enter the terminal to see the full deal lifecycle in action.

This article is educational and does not constitute legal or financial advice. Always confirm any instrument directly with its issuing bank through independently verified channels.