Difference between LC and SBLC: LC vs SBLC

Kingrise Finance Limited is a Letter of Credit (LC) provider and Standby Letter of Credit (SBLC) provider.

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So What is StandBy Letter of Credit (SBLC or SLOC)?

A standby letter of credit (SBLC/SLOC) 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.

A standby letter of credit can also be abbreviated SBLC or SLOC. A standby letter of credit is different from a bank guarantee.

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Letter of Credit (LC), Letter of Credit provider, lease Letter of Credit, HSBC Letter of Credit, Barclays Letter of Credit

Key Difference between Letter of Credit (LC) and the Standby Letter of Credit (SBLC):

A letter of credit (LC), also known as a documentary credit or bankers commercial credit, or letter of undertaking (LoU), is a payment mechanism used in international trade to provide an economic guarantee from a creditworthy bank to an exporter of goods. Letters of credit are used extensively in the financing of international trade, where the reliability of contracting parties cannot be readily and easily determined. Its economic effect is to introduce a bank as an underwriter, where it assumes the counterparty risk of the buyer paying the seller for goods

The ‘Letter of Credit’ and the ‘StandBy Letter of Credit’ are two legal bank documents that are used by international traders. Both these letters are used to ensure the financial safety between the supplier and their buyers. And, SBLC is a type of LC that is used when there is a contingent upon the performance of the buyer and this letter is available with the seller to prove the buyer’s non-performance during the sale.

Click Here To Get A Letter of Credit (LC) From A Prime Bank

LC and SBLC are the two financial instruments that are meant to safeguard the financial interests of the international traders i.e. buyers and sellers. It simply means that both these terms are widely useful while making transaction between the two trading parties. These help in giving financial security to both the parties. Also, these contracts are produced in good faith and in both the cases the fund gets mobilized.

During a transaction, the buyer wants an assurance of receiving his product or merchandise on time, and the seller wants his security of being paid on time at the completion of the job. Here, a letter of credit is issued, for it is an assurance or a type of guarantee that the seller will receive his correct payments in time by the clients. The LC solves both the issues by bringing in the buyer’s and seller’s banks into the transaction.

CLICK HERE TO GET SBLC FROM A PRIME BANK

The issuing bank of the buyer, then, opens a LC in the favor of the seller and states that seller will be paid and that he or she will not suffer any damages or losses because of the non-payment of the buyer. Though, the money transfer to the seller will only be initiated after all the conditions or documents of the contract are completed. However, the bank also safeguards the interest of the buyer by not paying the supplier until it receives a confirmation from the supplier that the goods have been shipped.

Based on this, there are two types of LCs being issued, they are:

Documentary Letter of Credit (DLC) and Stand By Letter of Credit (SBLC)

Now, the DLC depends on the performance by the supplier, whereas SBLC depends on the on the non-performance or default on the part of the buyer.

SBLC works on the same principle as a documentary letter of credit but with different objectives and required documents. The essence of SBLC is that the issuing bank will perform in the case of non performance or default by the buyer.

The purpose of this letter is to establish a bank guarantee for the deal or transaction with a third party. For example, if an individual wishes to take a loan, but does not have a sufficient credit standing, the bank may then ask for a guarantee from another party (third party), and this is done in the form of a standby letter of credit that is issued by another bank. However, the said individual would then have to produce certain documents or evidence to support the non-performance of the buyer to obtain the payment through the SBLC.

The bank is obligated to make payment if the documents presented comply with the terms of contract. Though, the SBLC are considered very versatile and can be used with modifications to suit the interests and requirements of the buyers and sellers.

Please Read: you want trade financing but you do not understand what a standby letter of credit is.

General advantages of the letter of credit

1. Letter of credit is very flexible computational tool that can be used for payment transactions on a variety deals of clients.

2. Letter of credit is a tool, the rules of using of which are defined in the authoritative international organization, are common and are recognized all around the world. This is beneficial to both customers and banks, as each party of the transaction has a clear understanding of rights, responsibilities, and standard requirements to all participants in the operation.

3. Letter of credit is useful as a tool for short-term financing.

Advantages of the letter of credit for importers

1.Letter of credit may open by own expense of the client, by funds provided by the bank on credit, as well as by providing support by customer to fulfill its obligations (mortgage, deposit).

2.Payment is performed after shipment of goods and delivery of documents.

3.Importer determines a list of the documents against which will be issued payment.

4.Limit the period of providing of the documents and shipment of goods.

Advantages of the letter of credit for exporters

1. To the obligation of the buyer to pay, it is added an obligation of the issuing bank, this liability does not depend on the relationship between the seller and the buyer.

2. If the letter of credit is confirmed, so there is a guarantee of payment from the second bank.

3. Performance of the letter of credit is a guarantee of payment.

Kingrise Finance Limited was incorporated in Hong Kong on September 22, 1999 and is a leading provider of business loans, international project funding, Standby Letter of Credit (SBLC), Letter of Credit (LC/DLC) Bank Guarantee (BG), Performance Guarantee Bond, Tender Bond Guarantee, Advance Payment Guarantee etc. Our 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 bank instruments 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: Cash Backed Bank Guarantee {BG} / 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.

Why Do Some LC & SBLC Transactions Fail? Most letters of credit and SBLC transactions fail because of GREED and unworkable procedures.
Below are the top 7 reasons why many bank lc and sblc transactions fail.

1. Free SBLC Without Upfront Fees – Many people are under the false illusion that they can close a BG or SBLC transaction free of charge without spending any money upfront. They want the Funder or bank instrument provider to pay the upfront fees so that they can complete the financial transaction for FREE, taking no risk and investing none of their own money. These type of free deals do not exist in the real world, if they did there won’t be any poor man in the world today. Banks have NEVER sent multi million dollar assets to customers for FREE and then hope the customer pays them later. This is the number one reason why many SBLC transactions fail.

2. Customers Procedure: Every week we receive sblc inquiries from people who say they want SBLC to be issued according to their own terms and conditions. Obviously this is not POSSIBLE; Banks do not work according to a borrowers terms. If you need SBLC or any financial instrument for that matter then you have to follow the bank or sblc providers laid down rules and procedures. This is the second reason why many sblc deals fail.

3. Price Shoppers – People are lured by fake artificially low sblc prices offered by scammers. The simple truth is, when a scammer is not delivering anything real they can afford to offer you the deal of the century. So when it sounds too good to be true then be careful. Price Shopping is the third reason why sblc transactions fail.

4. Greedy Million Billion Gang: Offers that set forth tranches of $1b, $5b, $20b and more, are just pure nonsense. Every week we receive offers from people who claim they need 70 BILLION Dollar SBLC or more. Truth is that most people who troll the internet with multi billion dollar SBLC requests do not have any money in their bank account to close the deal. Greed and Ignorance will make you lose your sense of reasoning. Many people don’t want to hear these things because truth hurts but we will keep saying the truth regardless. 

5. Bank Endorsed Deed of Agreement (DOA): Banks do not endorse SBLC deed of agreement contracts or LOI. This action would place a financial liability on the bank and they cannot and will not incur that liability on behalf of their depositors. So if you received any offer or document from anyone claiming it has been endorsed by the bank kindly run for your life because it is FAKE.

6.  BPU (Bank Payment Undertaken): Banks do not issue BPU to enable a customer to get a financial instrument without paying upfront fee. This is just joker-broker and uninformed customer nonsense. You don’t believe me? Well contact your banker and ask questions. I am a seasoned banker that has worked with some of the world’s biggest banks such as HSBC, Barclays etc so I know.

7. ICBPO MYTH: ICBPO means Irrevocable Conditional Bank Pay Order. Banks do not issue irrevocable conditional bank purchase orders (ICBPO), or any purchase orders, period. Many joker brokers and uninformed clients think they can close a deal with ICBPO. ICBPO is banned and illegal. In fact, a bank is precluded from incurring any liability on behalf of a depositor. And, the words “irrevocable conditional” form an oxymoron. No western world bank will issue a MT543, as it is a liability on behalf of the bank. In fact, as of September 1, 2003, the MT543 is gone from the banking world. This is just joker-broker and uninformed customer nonsense.

Why You Should Choose Kingrise Finance Limited For Your LC & SBLC Transactions?

  • Fast Turnaround
  • Best Top Rated Banks
  • Competitive Low rates
  • No prepayment penalty
  • 2 Days for Commitment
  • Extremely Satisfied Clients
  • WE KEEP OUR PROMISE
  • 20 Years of Experience & Trust
  • No Personal Collateral Required
  • Solutions for every customer & every industry.
  • Loan amounts from $1 million to no maximum.

BROKERS WANTED: We welcome brokers who are direct to the client. New brokers are welcomed and are rewarded with 2% commission on every deal they bring to us, but you must be direct to the client and not in broker chains. We do not get involved with daisy chain of brokers, neither do we tolerate scammers, jokers and time wasters.

We would welcome the chance to earn your trust and deliver you the best service in the industry. If you are interested to work with us kindly contact us immediately

Email: info@kingrisefinance.com
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Website: https://www.kingrisefinance.com