What Is a Standby Letter of Credit?
A standby letter of credit is an arrangement in which a bank guarantees payment to a “beneficiary” if something fails to happen. To do so, the bank issues a document which describes the conditions that will cause the bank will pay.
A letter of credit provides a promise from a bank, which should be a
disinterested third party. If the bank’s customer fails to do something
(like pay on time, complete a project on time, or satisfy specific terms
of an agreement) the bank—not the customer who failed to deliver—pays
the beneficiary. Ultimately, the funds come from the customer who
applies for the letter of credit, but the bank is responsible for paying
the recipient.
Standby letters of credit, like standard letters of credit, are useful for international trade as well as domestic transactions like local building projects. The key to a standby letter of credit is that something typically fails to happen.
Examples
Financial standby LOC: An exporter sells goods to a foreign buyer, who promises to pay within 60 days. If the payment never arrives (and the exporter required the buyer to use a standby letter of credit) the exporter can collect payment from the importer’s bank. Before issuing the letter of credit, the bank typically evaluates the importer’s credit and determines that the importer will repay the bank. But if the customer’s credit is in question, banks may require collateral (or funds on deposit) for approval.
This is an example of a “financial” standby letter of credit.
Performance standby LOC: A contractor agrees to
complete a construction project within a certain timeframe. When the
deadline arrives, the project is not complete. With a standby letter of
credit in place, the contractor’s customer can demand payment from the
contractor’s bank. That payment functions as a penalty to encourage
on-time completion, funding to bring in another contractor to take over
mid-project, or compensation for the headaches of dealing with problems.
This is an example of a “performance” standby letter of credit, and a failure to perform triggers the payment.
Kingrise Finance Limited are providers of StandBy Letter of Credit (SBLC). We also provide Business Loans, SME Loans, International Project
Financing, recourse Loans, Non Recourse Loans, Letter of Credit,
Standby Letter of Credit, Bank Guarantee, Performance Guarantee Bond,
Tender Bond Guarantee, Advance Payment Guarantee, Bank Comfort
Letter etc…
These bank instruments are issued from prime banks such as HSBC Hong Kong, Barclays Bank London, Standard Chattered Bank or any AAA rated bank of your choice.
Our BG and SBLC are cash backed and can be used for Discounting, Monetization and Private Placement Programs (PPP). They also can be used as collateral against a loan or credit line to secure Funding for Projects.
Bank Instrument Description:
1. Bank Instrument Type: Standby Letter of Credit {SBLC}
2. Face Value: USD/EUR 1Million (Minimum) to USD/EUR 50 Billion (Maximum)
3. Issuing Bank: Barclays Bank London, HSBC Hong Kong, Citibank New York, Deutsch Bank Germany or any prime bank.
4. Age: One Year and One Day (with rolls and extensions where applicable)
5. Leasing Price: 4% of Face Value plus 2% brokers commission (Applicable only if there are brokers in the transaction)
6. Delivery: SWIFT MT-760
7. Payment: MT103 Swift Wire Transfer
8. Hard Copy: Bank Bonded Courier within 7 banking days.
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- 20 Years of Experience & Trust
- No Personal Collateral Required
- Solutions for every customer & every industry.
- Loan amounts from $1 million to over $500 million
- We have solutions for every customer in every industry.
- Fast Approvals & Fast Funding- Closing in as little as 5 days
BROKERS: We welcome new brokers who are direct to their client. New brokers are welcomed and are rewarded with 2% commission on every deal they bring to us.
We would welcome the chance to earn your trust and deliver you the best service in the industry. If you are interested in any of our products or services, kindly contact us immediately via Email: info@kingrisefinance.com
