A Standby Letter of Credit (called“SLC” or “LC”) are written obligations of an issuing bank to pay a sum of money to a beneficiary on behalf of their customer in the event that the customer does not pay the beneficiary. It is important to note that standby letters of credit apply only whenever the issuing bank’s commitment to pay is not contingent on the existence, validity and enforceability of its customer’s obligation; this is called an “abstract” guarantee; that is, the bank’s obligation is to pay regardless of any disputes between its customer and the beneficiary. The issuance of letters of credit is a private transaction and does not result in the issuance of any public trading securities.
Why do we have standby letters of credit?
The standby letter of credit comes from the banking legislation of the United States, which forbids US credit institutions from assuming guarantee obligations of third parties. (Most other countries outside of the USA continue to allow bank guarantees.) To circumvent this US banking rule, the US banks created the standby letter of credit, which is based on the uniform customs and practice for documentary credits. In 1998 the International Chamber of Commerce (ICC) added ISP98 (International Standby Practices 98) as the rules to guide standby letters of credit. These rules are slowly being adopted; however, many of the standby letters of credit continue to rely on the ICC’s older guide, Uniform Customs and Practices for Documentary Credits, 1993 revision, ICC Publication 500.
What is the Purpose of SBLC ?
The standby letter of credit basically fulfills the same purpose as a bank guarantee it is payable upon first demand and without objections or defenses on the basis of the underlying transaction between the applicant and the beneficiary. It is up to the beneficiary to decide whether he may accept a standby.
How to get SBLC ?
If you wish a Standby Letter of Credit, raise your bank to issue one. You’ll presumably get to speak with someone within the bank’s industrial division or international trade department. Make certain to require many time beneath stand however it works and under what circumstances you’ll be answerable for payment.
SBLC Discounting 