Standby letter of credit

What is a standby letter of credit?

The standby letter of credit takes the form of a legal document that guarantees payment to the exporter of goods or services.

If the buyer fails to meet his obligation, the bank will cover the payment; that’s why It’s called a « standby » letter of credit.

The standby letter of credit works as a bank guarantee; click here to discover bank guarantees. The seller receiving a standby letter of credit is assured that the seller can meet its obligations.

If the seller requires payment advance of the goods or services, the standby letter of credit can act as a payment guarantee.

The advance payment standby letter of credit protects against one party’s failure to pay the other party’s advance payment.

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Disclaimer

This instrument is subject to the rules of documentary credits, publication 600 of the International Chamber of Commerce, and the International Standby Practices ISP 98 rules.