Advantages Of Standby Letters Of Credit.

You export or import of capital goods, equipment and you have a regular flow of business with the same buyers or sellers. A possible answer to your need is a Standby letter of credit or SBLC.

The standby letter of credit or SBLC is the irrevocable commitment of the bank to compensate the beneficiary in the event of default of payment of the debtor. SBLC are designed according to what the International Stand-By Rules And Practices or ISP98 establish.

SBLC are used by exporters in order to guarantee the payment for the merchandise in case something goes wrong. It is appealing for some users because it is easy to use and manage. It is recommended mostly for business partners that are known and frequent.

When SBLC have past their expiration date, they can be cashed immediately by the holder. The exporter will have to show the documentation that proves that the transaction was done different from what the letter establishes (a copy of the invoice, one of transport, certificate of non-payment, etc)

Some of the advantages of SBLC are:

It is simple, the seller guarantees provided that its own commitments, and credibility to the buyer.

SBLC are also flexible because the exporter and importer will not need as much paperwork in order to show their commitment. The exporter will show the buyer the documentation that shows the transaction did not comply with what was established, and once everything is cleared the transfer of the money will proceed.

SBLC will not be traduced into a great deal of transactions and will therefore be less expensive than letters of credit. The exporter will pay a commission for the fright and that is it. The SBLC are determined also by the levels of risk that some countries have and the quality of the issuing bank.

Risk-free. It gives peace of mind to those who use it because it will work as a guarantee in case that something goes wrong. It allows the exporter and importer to make successive travels to solve the situation.

For SBLC to be exercised, the exporter needs to show copies of invoices of transport, certificates of non-payment and others.