Standby letters of credit

Standby letters of credit are very much like documentary letters of credit,
their main difference is that, unlike DLCs, they only become operative in case
the applicant defaults, then the beneficiary in whose favor the SBLC was issued,
can draw on the SBLC and demand payment. A Standby Letter of Credit is a
payment guarantee issued by a bank or financial institution that can be used for
a wide range of commercial and financial transactions, local or international.

Stand By Letter of Credit Process

Being the direct SBLC Provider, we can support imports and exports by providing a Standby Letter of Credit – SBLC MT760 on behalf of the importer and in favor of the exporter to conclude their trade deals.

To avail of SBLC from us, follow the simple process given below:

1. At first, the buyer submits their SBLC request by sending their Sales and Purchase Agreement or proforma offer of their trade deal.
2. We will review the trade deal between the buyer/seller. After doing a careful study, we will inform the buyer about our approval of their MT760 request.
3. If their request is approved, we will sign a service agreement with them. Also, we will inform the client to pay the admin charges to start work on their Standby LC transaction.
4. After the receipt of admin charges, we will structure their SBLC and send the draft for their review & approval. Also, we will inform them to provide the required documents and pay the issuance fee.
5. Right after the draft approval and issuance fee payment, we will instruct our bank to issue the Standby LC from our bank account via authenticated SWIFT MT760 on behalf of the buyer and in favor of their seller.

What is a Standby Letter of Credit?

A Standby Letter of Credit (SBLC) is a written undertaking issued by a bank on behalf of its client. SBLC guarantees the bank’s commitment of payment to the seller, in the event of the buyer defaults. Considered as a “payment of last resort”, SBLC assures that the bank fulfills the payment obligations; in case if the client fails to oblige with the contract terms.

Standby Letters of Credit certifies the credit worth and payment strength of the buyer. Also, it helps to facilitate global trade between companies that don’t know each other and have different rules & regulations. Therefore, traders mostly preferred to use this financial instrument as it gives the required payment guarantee.

Moreover, MT760 can also be used for the purpose of Collateral for Credit Enhancement. Thus, it will help traders who plan to expand their business, without giving up their cash funds. Having SBLC improves the company’s cash flow & seen as a sign of good faith. Further, SBLC allows traders to use their cash capital for other dealings before payments become due.

Are you looking to get Standby LC for your domestic purchase? Contact Royal Cut Investment SBLC Providers in Dubai! We can extend our bank facilities from European Banks and will issue the required MT760 at ZERO Collateral.

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    Why Standby Letter of Credit Considered as a Backup Plan for Payment?

    A Standby LC can add a safety net to both local and global transactions by assuring payment for the completed service or the supply of goods. With such an agreement, the bank guarantees the payment towards the seller, if any unforeseen happens. The SBLC describes the different situations which could cause the bank to pay.

    For instance – A seller supplies the goods to the buyer who promises to make the payment within 30 days of shipment. If the payment never arrives, then the seller can claim the SBLC to the buyer’s bank to get the payment released.

    Since the buyer’s bank takes the responsibility to pay the seller in case of default; before issuing the Standby, the buyer’s bank typically evaluates the buyer’s creditworthiness & repayment skills. If the credit score of the client is low, then the banks may require collateral or funds to deposit to get the SBLC issued. In case, if you can’t able to fulfill the demand of the bank, then the bank will not proceed further with your SBLC request.

    But we, the SBLC Providers in Dubai understand the financial crisis faced by the traders; and also, we assist them to avail SBLC MT760 from our bank account without cash margin.

    How a Standby Letters of Credit Works?

    A Standby LC can add a safety net to both local and global transactions by assuring payment for the completed service or the supply of goods. With such an agreement, the bank guarantees the payment towards the seller, if any unforeseen happens. The SBLC describes the different situations that could cause the bank to pay.

    For instance – A seller supplies the goods to the buyer who promises to make the payment within 30 days of shipment. If the payment never arrives, then the seller can claim the SBLC from the buyer’s bank to get the payment released.

    Since the buyer’s bank takes the responsibility to pay the seller in case of default; before issuing the Standby, the buyer’s bank typically evaluates the buyer’s creditworthiness & repayment skills. If the credit score of the client is low, then the banks may require collateral or funds to deposit to get the SBLC issued. In case, you aren’t able to fulfill the demand of the bank, then the bank will not proceed further with your SBLC request.

    But we, the SBLC Providers in Dubai understand the financial crisis faced by the traders; and also, we assist them to avail SBLC MT760 from our bank account without cash margin.

    Standby LC Benefits

    Standby LC provides a lot of benefits for both importers and exporters which we have listed below:-

    • As an importer, you can cover the risk of the exporter at one time with one SBLC, and a tenure of 1 year. Also, you can renew the SBLCs, 15 days before the expiration date. So, it saves you more money and time in doing repeat business.
    • Availing SBLCs ensures the delivery of goods/services as per the terms of the trade contract.
    • The seller gets a guarantee of their payment once they agree with the T&Cs of SBLC. If for any reason, the payment is not made or denied, SBLC acts as an alternative source to claim their payment.
    • The seller can draw down loans by claiming SBLCs from their bank.
    •  Moreover, SBLC gives confidence to both parties involved in trade transactions.

    Parties involved in SBLCs Applicant:

    1. The Applicant (buyer) is the one who requests their bank to issue SBLC on behalf of their supplier.
    2. Issuing Bank: The bank that issues the MT760 on behalf of its client.
    3. Beneficiary: SBLC recipient or the supplier who receives the SBLCs in their favor.
    4. Advising Bank: The advising bank has a relationship with the issuing bank & will receive the SBLC to advise the same towards the seller’s bank.
    5. Seller’s Bank: The seller’s bank, from where the supplier receives the final SBLC.

    How Much Does an SBLC Cost?

    Generally, the applicant (buyer) borne the cost for the issuance of SBLC. Mainly, the cost includes – bank commission, processing fee, and transmission fee. All these charges paid by the importer at their bank as per the agreed contract between the buyer & the seller. To get more details on our tariff, Contact Us

    SBLC Provider

    In Dubai extend their facilities to provide SBLC MT760 from European Banks; on behalf of buyers to give the required payment assurance towards their suppliers. Our trade finance experts will frame the SBLC MT760 as per your requirement & will help you to conclude the trade deal within 48 working hours. To avail Standby Letter of Credit from rated banks, submit your requirements to us! We will get back to you ASAP.