Contract Fee Explanation
The Contract Fee represents the annual usage cost—or “rental”—for the financial instrument issued under the facility, such as a Bank Guarantee or Standby Letter of Credit. This fee is charged in exchange for the right to utilise the instrument for a fixed term, typically between one and ten years.
The Contract Fee is generally calculated as a percentage of the face value of the instrument and typically ranges between 5.00% and 7.50% per annum. The exact rate applied will depend on several key factors, including:
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The Applicant’s financial profile and creditworthiness
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The complexity and structure of the transaction
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The tenure of the facility
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The issuing bank selected
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Prevailing market conditions and interbank risk pricing
The precise fee percentage applicable to a given transaction is always specified within the Term Sheet, ensuring full transparency prior to any financial commitment.
This fee shall be payable only upon confirmation of issuance (i.e., upon receipt of the SWIFT advice from the Issuing Bank), and the Security Deposit shall be released and shall become the property of Balkan. The Contract Fee structure enables clients to access high-grade financial instruments without the capital burden of outright purchase or full collateralisation