PRODUCTS

What is a Standby Letter of Credit?

A Standby Letter of Credit (SBLC) is a written undertaking issued by a bank on behalf of its client. SBLC guarantees the bank’s commitment of payment to the seller, in the event of the buyer defaults. Standby LC is a “payment of last resort”. That means the bank fulfills the payment obligations, in case, if the client fails to oblige with the contract terms.

Standby Letters of Credit certifies the credit worth and payment strength of the buyer. Also, it helps to facilitate global trade between companies that don’t know each other and have different rules & regulations. Therefore, it is a preferable financial instrument used by traders and is most reliable in business trade dealings.

Moreover, SBLC can also be used as Collateral for Credit Enhancement. Thus, it is ideal for traders who plan to expand their business, without giving up their cash funds. Having SBLC improves the company’s cash flow & seen as a sign of good faith. Further, SBLC allows traders to use their cash capital for other dealings before payments become due.

Why Standby Letter of Credit Considered as a Backup Plan for Payment?

A SBLC can add a safety net to both local and global transactions by assuring payment for the completed service or the supply of goods. With such agreement, the bank guarantees the payment towards the seller, if any unforeseen happens. The SBLC describes the different situations which could cause the bank to pay.

For instance – A seller supplies the goods to the buyer who promises to make the payment within 30 days of shipment. If the payment never arrives, then the seller can claim the SBLC to the buyer’s bank to get the payment released.

Since the buyer’s bank is responsible to pay the seller in case of default; before issuing the Standby, the buyer’s bank typically evaluate the buyer’s creditworthiness & repayment skills. If the customer’s credit score is low, then the banks may require collateral or funds to deposit to get the SBLC issued. In case, if you can’t able to fulfill the demand of the bank, then the bank will not proceed further with your SBLC request.

But we, the SBLC Providers understand the financial crisis faced by the traders & assist them to avail SBLC MT760 from our bank account without cash margin or security.

How a Standby Letters of Credit Works?

When two parties (buyer & seller) agree to use Standby LC as their payment term to conclude their trade deal. Then, the buyer has to open Standby LC in favor of the supplier from their bank.  By issuing Standby LC in favor of the supplier & on behalf of the buyer, the bank guarantees the payment – even if the company closes down, declares bankruptcy, or unable to pay for goods and services provided.

For instance, if the buyer defaults, the seller has to present all documents mentioned in the issued SBLC to their bank. The bank verifies all the documents, and if it complies with the terms, they will pay the seller’s bank the amount due.

The main advantage of having SBLC is the potential ease of getting out of that worst scenario. E.g. If a contract calls for payment within 60 days of delivery and the payment not made, the seller can present the SBLC to the buyer’s bank for payment. Thus, the seller is guaranteed to be paid. And also, SBLC reduces the risk of the production order being changed or canceled by the buyer.

SBLC MT760 Benefits 

SBLC MT760 provides a lot of benefits for both importers and exporters which we have listed below:-

• As an importer, you can cover the risk of the exporter at one time with one SBLC, tenure of 1 year. Also, you can renew the SBLC 15 days prior to the expiration date. So, it saves you more money and time in doing repeat business.
• Availing SBLC ensures the delivery of goods / services as per the terms of the trade contract.
• The seller gets a guarantee of their payment once they agree with the T&Cs of SBLC. If for any reason, the payment is not made or denied, SBLC acts as an alternative source to claim their payment.
• The seller can draw down loans by claiming SBLCs from their bank.
• Moreover, SBLC gives confidence to both the parties involved in trade transactions.

Parties involved in SBLC

1. Applicant:

The Applicant (buyer) is the one who requests their bank to issue SBLC on behalf of their supplier.

2. Issuing Bank:

The bank that issues the SBLC MT760 on behalf of their client.

3. Beneficiary:

SBLC recipient or the supplier who receives the SBLC in their favor.

4. Advising Bank:

The advising bank have relationship with the issuing bank & will receive the SBLC for to advise the same towards the seller’s bank.

4. Seller’s Bank:

The seller’s bank, from where the supplier receives the final SBLC.

Can SBLC be Transferable?

Standby LC can be transferable if it’s subjected to the terms. This is a question that most of our clients ask before availing the MT760. Like other bank instruments like cheque, promissory note, etc. can transferrable in good faith. Likewise, MT760 can be transferred in favor of a second SBLC recipient. However, it requires a written request by the first SBLC recipient. And, at the same time, the approval of the issuing bank.

Standby Letter of Credit Cost

Generally, the applicant (buyer) borne the cost for the issuance of SBLC. Mainly, the cost includes – bank commission, processing fee, and transmission fee.  All these charges paid by the importer at their bank as per the agreed contract between the buyer & the seller. To get more details on our tariff, Contact Us

SBLC Provider

Udainfra L.L.C. has been offering SBLC MT760 from European Banks on behalf of buyers to fulfill their deal towards the suppliers.

Being an SBLC provider, our experts will frame the SBLC MT760 as per your requirement & will help you to conclude the deal within 48 working hours.

To avail Standby Letter of Credit from rated banks, submit your requirements to us!submit your requirements to us! We will get back to you ASAP!