Standby Letter Of Credit Vs Letter Of Credit. When the parties of a business deal don't know each other, they often ask for documents from a bank assuring the trustworthiness of the other party. How a standby letter of credit works.
The contract is a standby. A standby letter of credit is more expensive than a regular letter of credit. A standby letter of credit (sblc) can add a safety net that ensures payment for a completed service or a shipment of physical goods.
A standby letter of credit (sblc / sloc) is seen as a guarantee that is provided to a potential buyer or contractor.
While the fees of a regular letter of credit range from 0.75% to 1.50% of the amount covered, a bank may charge anywhere between 1% to 10% to cover the same amount under a standby letter of credit. There are a few types of letters of credit which include documentary credit and standby letters of credit. How a standby letter of credit works. A standby letter of credit (sblc) can add a safety net that ensures payment for a completed service or a shipment of physical goods.