Letter of credit
is the liability of the bank, on the behalf of the client (account party) to pay the seller of goods /services (beneficiary) a definite sum of money under the timely provision of the corresponding to the letter of credit documents which confirm goods delivery or specified services provided.
Letter of Credit, L/C, DLC —
is one of the most important work instruments in the international trade. This form of payment wide spreading on the international market is explained by the ability to balance interests of sellers (exporter) and buyers (importers), eliminating a majority of risks both out of the seller (importer) and buyer (exporter).
The letter of credit advantage in comparison with other types of payment is the assurance factor.
The most profitable payment form is irrevocable documentary letter of credit. Irrevocable documentary letter of credit provides a rapid export income receipt, while meeting all its conditions and are opened for trade delivery; provided services; project, assembling and construction work payment.
One of the varieties of letters of credit is stand-by letter of credit.
Stand-by letter of credit, SBLC —
is a written liability of the bank of issue to pay for the account party (importer, buyer) to the beneficiary (exporter, supplier) in case of failure to meet the agreement obligations and beneficiary written declaration of payment demand.
Stand-by letter of credit is often issued for the obligation performance guarantee presentation of the account party to the beneficiary.
Stand-by letter of credit is issued for a time period (more often this time period correspond to contract validity period or contract period time of goods delivery).
Stand-by letter of credit is issued additionally to the contract, providing regular payments by the account party to the beneficiary.
Contract payments are performed by the account party independently from issued stand-by letter of credit.
We issue for our clients Stand-by letter of credit with functions of guarantee, i.e. applied only in cases of failure to meet contract obligations.
The difference between stand-by letter of credit and letter of guarantee is that stand-by letter of credit relies upon Uniform Customs and Practice for Documentary Credits (UCP 600), and it has a definite standards in documents check, what is not applied to letter of guarantee and crucially increase the protection level.