Stand By Letter Of Credit

A standby letter of credit is a guarantee of payment issued by a bank/FI on behalf of client where the bank/FI promises to pay a "beneficiary" in case of default by the applicant.

Historically, Standby letters of credit were developed because the US regulator legally limited US bank's authority to issue guarantees.

Standby letters of credit are a very flexible tool, making them a suitable product for securing vast range of payment scenarios.

It is most commonly used for international trade as it provides assurance to the other party that the payment will come through anyway. However, a standby letter of credit involves quite a few complexities and therefore one must consult with an expert if not well acquainted with how it actually works.

A breakdown of SBLC types is provided below:
  1. A performance standby
  2. An advance-payment standby
  3. A bid-bond or tender-bond standby
  4. A counter standby
  5. A financial standby
  6. An insurance standby
  7. A commercial standby
  8. A direct-pay standby

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