A bank guarantee in case of non-payment of commercial import or export transactions.
The Standby Letter of Credit (SBLC) is an irrevocable documentary commitment, separate from the sales contract, issued by the bank to a third-party beneficiary and promising to pay on behalf of the originator
a specific sum of money against delivery of documents satisfying the terms and conditions of the SBLC.
It can be used for import and export transactions. It is particularly suitable for existing business relationships where the two parties have already built up trust.
This is a guarantee rather than a payment instrument. It protects against the risk of default.
A simple tool
- It is more flexible than documentary credit. It releases the partners from the need to exchange extensive documentation through their banks.
- The funds drawn against an SBLC require documents to be submitted that satisfy the terms and conditions of the SBLC (e.g. a payment demand, certificate of non-payment, copy of the sales invoice, copy of the transport document, etc.)
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