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Plenty of Benefits of the SBLC

There are plenty of benefits of the SBLC and its various other services. There are a lot of banks and finance companies that provide SBLC for Lease to a third party.

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Plenty of Benefits of the SBLC

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  1. Let’s talk about Leased Standby Letter of Credits

  2. SBLC or the Standby Letter of Credit is one of the best options that all the customers of a bank can enjoy. • There are plenty of benefits of the SBLC and its various other services. • However, you must know exactly what is SBLC? • SBLC or Standby Letter of Credit is basically a bank instrument which actually a guarantee of payment issued by a bank on behalf of a client that is used as the "payment of last resort".

  3. That means, if the client fail to fulfill a contractual commitment with a third party, the bank is going to pay on the behalf of the client to the 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 performs brief underwriting duties to ensure the credit quality of the party seeking the letter of credit, then sends notification to the bank of the party requesting the letter of credit.

  4. What are the types of SBLC? • There are two types of SBLC. They are – Performance Standby Letter of Credit and the other one is Financial Standby Letter of Credit. • What is the leased Standby Letter of Credit?

  5. There are plenty of banks and finance companies that provide SBLC for Lease to a third party and these too have a lot of benefits. • But these are provided for a specific fee and are quite expensive than the normal ones. • The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, or the SBLC and then lease a guarantee to that customer for a certain amount of money and over a certain period of time, which is typically less than two years.

  6. The issuing bank will send the SBLC to the borrower’s main bank, and the issuing bank then becomes a backer for debts incurred by the borrower, up to the guaranteed amount. • As mentioned above, these leased SBLC are quite expensive and it can cost you up to 13% of the guarantee amount. • These are basically made up for initial setup fee and an annual fee.

  7. These both are basically a percentage of the dollar amount to be “guaranteed”, or covered by the issuing bank in the event that the company can’t promptly pay its debts.

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