Difference between Letter of Credit (LC) and Standby Letter of Credit (SBLC)- Kingrise Finance Limited

 

Difference between Letter of Credit (LC) and Standby Letter of Credit (SBLC)- Kingrise Finance Limited
Difference between Letter of Credit (LC) and Standby Letter of Credit (SBLC)- Kingrise Finance Limited

What is standby letter of credit (SBLC)? A standby letter of credit (SBLC) 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. https://kingrise.finance.blog/2020/03/31/what-is-standby-letter-of-credit-sblc/

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So what is the difference between Letter of Credit (LC) and Standby Letter of Credit (SBLC)?

Key difference: 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.  

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.

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.

Kingrise Finance Limited was incorporated in Hong Kong on September 22, 1999 and is a leading provider of business loans, international project funding, Lease 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 Choose Us?

  • 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.
  • Fast Approvals & Fast Funding- Closing in as little as 5 days

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 via

Website: www.kingrisefinance.com

Email: info@kingrisefinance.com

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