Standby Letter of Credit (SBLC)

FINANCIAL BACKING :
An SBLC is a document issued by a bank on behalf of a client (the applicant) that guarantees payment to a beneficiary (usually the seller or the exporter) if the client fails to fulfill their contractual obligations. It acts as a form of collateral that assures the beneficiary they will receive compensation if the buyer defaults.

 PAYMENT TRIGGER:

Unlike commercial letters of credit used for direct payment upon presentation of documents proving shipment or delivery, SBLCs are typically used as secondary or backup forms of payment. Payment is triggered only when the beneficiary presents documents showing that the applicant has failed to fulfill its obligations under the contract.

 

RISK MITIGATION:

SBLCs are used to mitigate various risks in international trade, such as non-payment or non-performance by the buyer. They provide assurance to the seller that they will receive payment even if the buyer defaults, thereby reducing the risk of doing business across borders.

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CONTRACTUAL REQUIREMENTS:

SBLCs are often required in contracts where the seller is concerned about the creditworthiness or ability of the buyer to fulfill their obligations. They provide a guarantee of payment that is independent of the buyer's financial standing.
 

TYPES OF SBLC

-  Performance SBLC - Guarantees payment to the beneficiary if the applicant fails to perform its contractual obligations, such as delivering goods or completing a project.

-  Financial SBLC  - Acts as a guarantee of payment for financial commitments, such as loans or lease agreements.

PROCESS AND MECHANISM

- Issuance - The SBLC is issued by the applicant's bank (issuing bank) at the applicant's request and in favour of the beneficiary

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-  PRESENTATION OF DOCUMENTS

The beneficiary must present compliant documents proving non-performance or default by the applicant under the contract terms.

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- PAYMENT

Upon verification that the conditions of the SBLC have been met (non-performance by the applicant) the issuing bank will make payment to the beneficiary

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LEGAL AND FINANCIAL CONSIDERATIONS

SBLC are legally binding instruments governed by international rules such as Uniform Customs and Practice for Documentary Credits (UCP 600)

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COST / FEES

Banks charge fees for issuing SBLCs, which typically include issuance fees, amendment fees, and possibly confirmation fees if the SBLC is confirmed by another bank.

In conclusion, SBLCs are crucial in facilitating international trade by providing a secure mechanism for sellers to ensure payment even if the buyer defaults on their contractual obligations. They enhance trust between parties involved in cross-border transactions and serve as effective risk management tools in global commerce.

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The following Corporate offers through Banks / Financial Institutions - Trade Performance Guarantee : Non-Cash Back

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Asia Pacific Investment Bank                                UBB Investment Bank                                                ACE Investment Bank      

Suisse Bank  PLC                                                         HSBC Bank PLC*                                                         Barclays Bank PLC*

BNP Paribas SA*                                                         Deutsche Bank AG*                                                    J P Morgan Chase Bank*  

CITI Bank NA*                                                             Society Generale*                                                        Royal Bank of Canada*

UBS Group AG*   

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1) The applicable fee always differs between  2.50% to 11.00% depending on the transaction, Face Vale, Country, Profile and so on.

2)  All the payments are payable to the Participating Bank / Financial Institutions as per Invoice

3) The client must submit the copy of Contract, Purpose, or if any specific format to be issued

4) The client should disclose correct information to manage and support long term relationship basis.

5) Minimum Face Value between $ 0.50 Million to  $ 200 Million

* Availability of the Instrument subject to change

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