Standby letter of credit is a very reliable means of payment for activities related to foreign trade, and is used to guarantee different kinds of obligations.

1. STANDBY LETTER OF CREDIT

2. How Standby Letter Of Credit Is Different
From A Normal Letter
 Standby letter of credit is a very reliable means of payment for
activities related to foreign trade, and is used to guarantee
different kinds of obligations, in which if the applicant does
not comply with the commitments made, the bank
guarantees payment.
 nternationalTrade is an activity in which the way of payment
and collection of international sales, exports and imports are
of vital importance, with the addition that given the
complexity of the operations carried out, choosing the most
efficient form of payment, that is, the one that allows
obtaining the maximum security of collection at the lowest
possible costs, depending on the type of operation or parties
involved, is essential for obtaining competitive prices that
allow entry into foreign markets.

3.  The SBLC is a document issued by a bank (issuer) by
order and express request of a client (orderer/importer),
by which it authorizes the beneficiary (exporter) to issue
a bill of exchange against the said bank or against
another entity designated in the letter itself, committing
to pay it, provided it is issued in accordance with the
conditions of the letter of credit and accompanied by the
required documents.
 The standby letter of credit (or contingent credit) does
not constitute a means of payment per se but functions
more as a guarantee against the possible non-payment
of an importer.

4.  The International Chamber of Commerce (ICC) regulates
the SBLC in two of its publications: UCP 600 in general
and, more specifically, UCP 590 “International Stand by
Practices”.
 The great operative difference between the letter of
credit and the normal letters of credit is that in the
normal letter of credit the documentation must be
presented to the bank as a necessary condition to collect
the export and in the letter of credit, there is only to
present the documentation to the bank to collect if the
importer has failed to pay within the stipulated period.

5. The main advantages of the standby letter
of credit compared to normal letters of
credit
 The standby letter of credit is less operationally complex
for the exporter than the normal letters of credit since
the exporter only has to present the documentation
required in the letters of credit in the event of default by
the buyer.
 In relation to ordinary guarantees, there is an absolute
separation between them and the commercial operation
they cover.

6.  Thus, while a commercial dispute over the compliance or
non-compliance of any of the parties may contaminate
the guarantee represented by the ordinary guarantees,
the letter of credit is not affected in any way, and in the
event of non-payment, the exporter presents the
stipulated documents to the bank and the bank (if the
documents are formally compliant) must pay.
 The standby letter of credit is issued under the
international CCI regulation, while the ordinary
guarantees are subject to the legislation of the countries
of the banks that guarantee the operations.

7. VISIT
http://www.prominencebank.com/