Standby Letter Of Credit
STANDBY LETTER OF CREDIT (SBLC)
A Standby Letter of Credit is a guarantee that is made by a bank on behalf of a client typically a buyer, which ensures payment will be made to the beneficiary, typically a seller if the client cannot fulfill the contractual obligations. A Standby Letter of Credit is also known as Non-Performing Letter of Credit.
A guarantee of payment issued by a bank on behalf of a client that is used as “payment of last resort” should the client fail to fulfil a contractual commitment with a third party. Standby letters of credit are created as a sign of good faith in business transactions, and are proof of a buyer’s credit quality and repayment abilities. The bank issuing the SBLC will perform brief underwriting duties to ensure the credit quality of the party seeking the SBLC, then send notification to the bank of the party requesting the SBLC (typically a seller or creditor).
Here are a few types of Standby Letters of Credit or Guarantees offered by SBG
- Retention Guarantees or Advance Payment Holdback under Contract Guarantees.
- Performance Guarantees which is also known as Performance Bond.
- Advance Payment Guarantees.
- Financial Guarantees.
- Bid Guarantees that are also known as Bid Bond.