Standby Letter of Credit

Standby letter of credit (SBLC or SLOC) is a guarantee issued by the bank or a financial institution as per ISP or in some cases, UCP rules will be applied. The guarantor (issuing bank) assures that the liabilities of a debtor will be met in case of a breach. In short, if the debtor fails to settle a debt, the guarantor will cover the claim in case of any breach of contract. A Standby letter of credit (SBLC/SLOC) allows the business or a consumer, or debtor, to acquire goods, services, participating in a tender or either bid or performance, or buy equipment. 

SBLC‘s are widely used in international trade by standing as an assurance and SBLC stands as a secure payment method in terms of international trade. 

ITF supports startups, SMEs, and large corporations to fulfill the demand without pledging their collateral. Beneficiaries agree with it by knowing that ITF products are asset-backed so the security of payment rests assured.

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Financial Standby letter of credit
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Performance Standby letter of credit
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Standby letter of credit - As per URDG & ISP rules.
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Commercial Standby letter of credit - As per UCP rules.
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Bid Bond or Tender Standby
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Advance Payment
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Warranty Standby
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Insurance Standby

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Financial (Standby letter of credit - SBLC)

Financial or Commercial standby letter of credit (SBLC/SLOC) is a commitment of  payment for goods or services as specified by an agreement made between buyer and the seller. Financial standby is a guarantee of payment if there is breach in contract. 

Example: A trading company, may facilitate SBLC to reassure a seller of certain commodity that buyer will pay before the maturity date. Usually this type of SBLC acquired if purchase volume is huge and they might working on a open account basis to back the financial SBLC as a insurance.

Performance (Standby letter of credit - SBLC)

Performance Standby is issued to the beneficiary whether they are government, public or private bodies usually it happens the tender bidding contract.  Beneficiary urges the applicant to issue the bid bond during the bid, and performance bond after the contract gets awarded to applicant.

Performance standby (SBLC) act as a assurance from the bank, or financial institution or insurance company in favor of a beneficiary by the request of an applicant.

Performance SBLC utilized to support the beneficiary who are concerned about the prospect, that the applicant might become insolvent or otherwise incapable to fulfill the contractual obligations. In the event of bankruptcy, the beneficiary receives compensation from the guarantors’ bank or institution. And it reduces financial stress or other damages caused by the applicant. 

Other SBLC/ SLOC

Warranty Standby is a commitment that guarantees the buyer and seller or between the contractor and the investor or a consumer, It promises the buyer or an investor if any defects occurred during the warranty period will be repaired or replaced. Warranty bond mostly utilized in Construction, EPC, other heavy and consumer goods industries. 

 

A Bid Bond or Tender Standby is issued as an initial portion of the bidding process participated by the contractor, supplier or services to a project, a Bid bond widely used in government projects where the number of participants applies for a selective tender to get awarded under the bidding terms. 

 

Advance Payment Standby is a bank guarantee where an issuer (bank) undertakes the obligation to draw an advanced payment to the buyer, when the seller debts and fails to deliver the goods or services, and it guarantees that the advance payment will be returned to the buyer or the beneficiary during this occurrence.