WnetLink Trade Support
Standby Letter of Credit
A guarantee issued by a bank or a financial institution to pay a beneficiary on a client’s behalf in a situation where the applicant defaults, is known as a standby letter of credit. This was developed as a consequence of legal limitation put by the US regulator on the bank’s authority for issuing guarantees.
A standby letter of credit is considered quite suitable for a wide range of secure payments making it quite a flexible tool. Most commonly, it is used for international trade purposes for providing assurance to the party that it will receive the payment whatever the case it. Having said this, there are quite a few complexities involved in a standby letter of credit. This suggests that it is necessary to have a consultation with an expert in case complete information is not available regarding the procedure.
There are certain types of a standby letter of credit which are mentioned below:
- A direct-pay standby
- A performance standby
- A bid-bond or tender-bond standby
- An advance-payment standby
- A financial standby
- A counter standby
- A commercial standby
- An insurance standby
We need the following documents/ information for finalising the draft –
- Filled in application form
- Verbiage required in the instrument for SBLC & BG / Pro-Forma Invoice for DLC (If available)
- Trade license of your company
- Share Holders List
- Passport copy of main applicant
- Last Three years audited balance sheet
- Last Six months latest bank statements
- We receive application from client and review it and when we are happy to proceed.
- We will arrange a meeting with the client to discuss the terms of the transaction.
- We will select the Bank who is ready and willing to transact.
- We will send out an offer letter for the client to review, and when the client accepts it, we will create the draft of the instrument for the client to review along with their lender / bank / supplier.
- Once the lender / bank / supplier approved the draft, the client or the lender/bank/supplier should sign and stamp the draft, and send it back to us.
- We will send an agreement/contract for the client to sign and send back to us.
- We will send the client the invoices along with an indemnity document to sign.
- When we received the signed counter indemnity document back from the client and the payment for the issuing fee is confirmed,
- We will SWIFT the instrument to the beneficiary’s bank immediately.
- We will then send the client the relayed copy of the instrument via email within 10 working days.
Note: The charges will depend on the value of the Financial Instrument, Tenure, Issuing Bank / Financial Institution.