Standby Letter Of Credit: What Is It? And Its Benefits
• The SBLC is a bank guarantee that it is used by exporters to secure the execution of a contract. • It is mainly used when making international transactions. It is a term widely used to secure payments in national and international trade.
It has lot of advantages and some of them as listed below: • Standby letter of credit gives the issuing bank to stay independent from any kind of obligations and disputes arising between the partners.
• In order to pay the full amount the issuing bank only need to check if the documents submitted by the beneficiary meet with the terms and conditions specified in the standby letter of credit. • SBLC letter of credit is very beneficial to seller as in case of any disputes between the trading parties the seller can withdraw the fund according to the terms and conditions of letter of credit and goes to court later to resolve their dispute.
• The letter of credit can be quickly executed. To receive the full payment from the bank, the seller has to present the proof of material type and quantity along with the shipping documents which support claim of shipping the good. • And after the issuing bank verified all of these documents, the seller will receive the payment instantly. • A standby letter of credit gives guarantee to the seller of receiving the full payment in a certain time.
• Another advantage of standby letter of credit is it gives ability to customize from one transaction to another. It is highly customizable. • In the letter of credit both of the trading partner can put their required terms and condition and make it a mutually exclusive list of clauses. • Establishing a new trade relationship or transact with unknown partners become easy With the help of SBLC letter of credit. It also provides huge help to expand ones business to new area quickly.
• The standby letter of credit is a very safe way for seller to receive payment if there is a chance of buyer going bankrupt. • In other words a standby letter of credit makes the seller insulates from the buyer’s business risk.