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What is a “Standby Letter of Credit” (SBLC)

What is a Standby Letter of Credit (SBLC)? A standby letter of credit is a lender's guarantee of payment used primarily in international trade.

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What is a “Standby Letter of Credit” (SBLC)

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  1. What is a “Standby Letter of Credit” (SBLC) and its Differences with Bank Guarantee

  2. Bank guarantee and standby letter of credit for the most part utilized when one makes an international transaction and with the end goal of U.S. deals, buys and transactions when you require proof that you can get to money without prior warning. • On the off chance that you are making a buy at that point bank guarantee is more secure and if there should arise an occurrence of selling a standby letter of credit is more valuable.

  3. You may think What is a “Standby Letter of Credit” (SBLC) and what its differences with Bank Guarantee?

  4. The similarities in bank risk: • If there should arise an occurrence of both SBLC letter of credit and bank guarantee a bank confront risk, yet since bank guarantee offers more protection so the risk additionally winds up higher. • You won’t have a programmed endorsement in the event of this kind of report. Because of the involvement of the risk, banks may acknowledge or deny your demand depending on your credit standing.

  5. Similarities of both: • One of the main similarities of both standby letter of credit and bank guarantee is for the buy you influenced bank to will give a guarantee of payment to the merchant. • Venders can guarantee their payment for the things they sold, by “bring in” the bank guarantee or standby letter of credit.

  6. At the point when a dealer sold their things to you they regularly expect an immediate payment however in the event that you neglect to give payment in time, at that point the merchant can request that your bank follow up on the standby letter of credit or bank guarantee for the payment. • Nowadays’ standby letter of credit and bank guarantee archive are exceptionally prevalent because of the uncertainties of international deals and currency trades.

  7. Differences in protection: • There is a major contrast can be seen in the standby letter of credit and bank guarantee, in spite of both of them guarantee the payment of vender. • In the event of bank guarantee as a standby letter of credit, it likewise ensures the vender however it additionally offers protection to the buyer as well. • Since both records give protection to the dealer, they can pick both of them.

  8. Be that as it may, buyers more incline toward a bank guarantee since they can give you protection if the dealer did not send your buy thing or it the thing is harmed in the time you get and repay the cash from the merchant.

  9. The difference in the performance: • In case of an international sale, a seller more prefers a standby letter of credit over bank guarantee. • They more prefer a standby letter of credit because it is not only you will receive your guaranteed payment fast and it also involves currency conversion, if needed. • But a bank guarantee is triggered only when either buyer or seller is non-performing.

  10. So this is the best answer to What is a “Standby Letter of Credit” (SBLC).

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