What is Proof of Funds (POF)?

What is Proof of Funds (POF)?

A document which demonstrates that a person or company has a certain financial standing. It usually comes in the form of a bank, thrift, security or custody statement. It may be issued by a ‘’non bank’’ such as a hedge fund or investment fund. POF may be communicated via email, fax or SWIFT messages. Specifically Proof of Funds (POF) may include account statements, verification of deposit, (VOD), bank comfort letters, tear sheets, blocked funds letters and a number of SWIFT messages. Some of these may include leased funds. SWIFT messages have specific message types (MT) for specific applications. The most well known are MT760 bank guarantees but there are many more SWIFT message types for specific applications. SWIFT message types include MT999, MT199 and so on. An MT 103-3 is for an immediate unconditional cash transfer. It is careful to consider the; name, nature, and substance of financial instruments. For example the name of a document might be “MT760”, the nature of is ‘’a secure electronic signal’’ the substance is potentially ‘’an irrevocable financial contract’’. Similarly the name might be ‘’fax’’ or ‘’facsimile’’, the nature is ‘’a verifiable electronic signal’’, the substance is potentially ‘’an irrevocable financial contract’’. In any event the normal purpose is to show financial standing and access deals that are otherwise unobtainable. If structured correctly you could potentially import an infinite value of commodities without having to borrow funds. This could be done via ‘’back to back bank guarantees’’. Which means you could leverage your capital infinitely, and do the biggest international deals with your only capital requirement being; paying the fees to the issuers. National and provincial governments often accept Proof of Funds rather than ‘’cash’’. This often happens for environmental bonds, thus allowing mining companies to spend the ‘’cash’’ on building the mine and stimulating employment. In the rare and unfortunate situation where there is a toxic spill THEN the government claims against the POF issuer. In turn the POF issuer claims against the collateral of the client.

Many uses of Proof of Funds:

  1. Reserves to close real estate transactions
  2. Net worth requirements
  3. Proof of liquidity
  4. Bonds for performance of construction contracts
  5. Bonds for protection of environment adjacent to mines
  6. Import and export
  7. Commodities and securities trading

Common Procedure in Securing POF:

  1. Payment of consultation fee and confirmation of consultation time and means (skype, phone, etc)
  2. Client provides completed deed of indemnity,
  3. Consultation regarding the size, scope and purpose of the POF,
  4. Consultation regarding your current situation, resources, and needs,
  5. Preliminary agreement regarding how best to move forward for your particular deal,
  6. Possible issuance of application form,
  7. Client submits application form,
  8. BESTpof considers details in application form,
  9. Final consultation to confirm any details in application form,
  10. Client provides confirmation of ability to pay issuers fee, (current bank statement),
  11. BESTpof provide offers from willing issuers,
  12. Client pays fee and Proof of Funds is issued.