1 / 9

Meaning of Standby Letter of Credit

The standby letter of credit is a guarantee that is provided by the bank. SBLC on the other hand also shows good relationships of the person with that of the bank.

hansongroup
Download Presentation

Meaning of Standby Letter of Credit

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Benefits of Standby Letter of Credit

  2. If we want to define, stand by letter of credit or in short SBLC, then we can state that it is a guarantee of payment issued by a bank, on behalf of the client that is involved in the transaction, as a payment of last resort of payment, if the client falls to fulfill other contractual obligations. • Here lots of aspects need to be considered. The SBLC is a guarantee that is provided by the bank.

  3. Which means, the bank itself takes the risk on behalf of the client and the client, if he wants, then he can rely back on the bank as the bank has promised to pay that specific some of the money, in case, he fails to fulfill the commitment. • Next, comes, the words "last resort of payment". Here the SBLC should be used as the last resort as seek only when you have no other options.

  4. SBLC isn't intended to use as payment source under normal circumstances. • If one is financially broken yet, he still needs to pay for obligations, then SBLC or Standby Letter of Credit can be used and via this payment, he can get out of the trouble of some sort. • But as it has been said, it must be the last resort of options. When every other way is tried and failed, only then payment through SBLC is considered.

  5. He needs SBLC does provide a relief in terms of when a crisis arises. A standby letter of credit, of the bank, can save someone falling into bankruptcy. • SBLC on the other hand also shows good relationships of the person with that of the bank. • Since the bank is offering a guarantee on behalf of the client, it shows that the client does have some good track record or otherwise banks wouldn't have issued an SBLC for that person and take the burden of fulfilling the payment on their own hand.

  6. In short, if there is an SBLC in place, it somewhat gives a sense of relief as, even if the person cannot pay, the borrower could approach the bank and recover the amount from there. • Also, it shows the credit status of that person, as to have an SBLC, you need to have a good line of credit with the bank or otherwise the bank won't issue an SBLC on behalf of you.

  7. THANKS • Thus SBLC plays a key role in a transaction which involves multiple parties and a trust is gained.

More Related