Standby Letter of Credit Information
Standby Letter of Credit or SBLC (MT-760) is a written obligation of an issuing bank as a Standby LC provider bank to pay a specified amount of money on their client’s behalf and in favor of a beneficiary in the event that the client/buyer is unable to complete their financial obligation to the seller/beneficiary.
Standby LC is a sign of good faith in commercial transactions and is proof of a buyer’s financial credibility and repayment abilities.
Standby LC is commonly used in commodity business, like to acquire merchandise from a local supplier or international exporter. SBLC can also serve as a security to avail credit lines and is ideal for business organization that plans to expand their business and does not want to utilize their assets.
Standby LC is always issued as an Irrevocable financial instrument and cannot be revoked or cancelled once it has been issued & transmitted via authenticated swift MT-760 by an issuing bank/provider bank. Standby LC can be transferred or assigned to a second beneficiary/party upon written instruction from the first beneficiary. The transferring bank must notify the issuing bank the amount transferred and the effective date of the transfer.
Standby Letter of Credit is provided as per the latest uniform rules ICC Publication No. 600.
The Parties Involved in Standby Letter of Credit
Applicant: client of the bank that request to issue the Standby LC. The company must have adequate credit line with their bank to issue the SBLC. Otherwise, they may be asked to provide financial collateral or cash margin to issue the same.
Beneficiary: The supplier/party who will receive the issued Standby LC.
Issuing Bank: The applicant/buyer’s bank (provider bank) who facilitates the issuance of Standby LC.
Correspondence Bank: This is the bank who will advise the issued SBLC to the beneficiary’s bank on behalf of the issuing bank, in case if the issuing bank doesn’t have a direct relation with the beneficiary’s bank.
Advising Bank: A bank representing the beneficiary. Advising bank works for the beneficiary in keeping the financial instrument in the banking system.
Bronze Wing Trading LLC as a direct provider of SBLC from Top European Banks, structures their client’s transactions in a way that they will be able to meet their business requirement successfully while protecting their business interest as well.
Standby Letter of Credit Procedure
To obtain Standby Letter of Credit from Bronze Wing Trading L.L.C. please follow the below procedure:
1. Buyer presents their trade deal requirement by submitting buy and sell agreement or proforma invoice.
2. BWT will do due diligence on the trade transaction between importer/buyer & exporter/supplier and informs the concerned party if the SBLC application is approved or not.
3. If approved, BWT will ask their client to submit further documents and payment being their SBLC charges.
4. Upon receipt of documents and SBLC charges, BWT will proceed right away and will establish Standby Letter of Credit from their bank account with European Bank via authenticated swift MT-760 to the supplier’s bank.
Standby Letter of Credit Video