SBLC Standby Letters Of Credit Can Help Establish 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.

Financing for your small business isn’t always easy to come by—but it’s important to look down every avenue of opportunity; you might not be aware of one of the most powerful financing tools out there. Standby letters of credit can help your business in tough contractual and financial situations, making people more likely to sign contracts and do business with you.

What is a 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.

The standby letter of credit is never meant to be used, but prevents contracts from going unfulfilled in the event your company closes down, declares bankruptcy, or is unable to pay for goods or services provided. Standby letters of credit help prove a business’ credit quality and repayment abilities.

Types of Letters of Credit
• Performance SBLC standby letter of credit
• Financial SBLC standby letter of credit

How to Obtain a Letter of Credit

The standby letter of credit process is similar to that of obtaining a commercial loan, with a few key differences.

As with any business loan, you will need to provide proof of your creditworthiness to the bank. However, the letter of credit approval process is much quicker, with letters often being issued within a week of all paperwork being submitted.

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.

Contact us today for more details or to obtain letter of credit.

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