A standby Letter of Credit (SBLC) 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
The standby basically fulfills the same purpose as a bank guarantee, it is payable upon first demand and without
objections or defenses on the basis of the underlying transaction between the applicant and the beneficiary. It is up to the beneficiary to decide whether he may accept a standby.
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