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Can SBLC Standby Letters Of Credit Establish Their Trust
The letter of credit 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.
What is an SBLC Standby Letter of Credit? A letter of credit is a guarantee of payment by a bank on behalf of their client. It is a loan of last resort in which the bank fulfills payment obligations by the end of the contract if their client cannot.
Unlike traditional loans, the bank will require a standby of letter of credit fee of between 1-10% of the SBLC amount before issuing the letter. This fee is usually charged per year that the letter of credit is in effect. If the terms of the contract are fulfilled early, you can cancel the letter of credit without incurring additional charges.