EURO EXIM BANK
Standby Letter of Credit Services
A standby letter of credit from Euro Exim Bank is a guarantee that ensures payment to the beneficiary if the applicant fails to fulfil contractual obligations. It acts as a safety net in both domestic and international trade, offering trust and confidence between partners. Euro Exim Bank issues standby letters of credit under its Class "A" international banking licence from the Financial Services Regulatory Authority of St. Lucia.
The applicant, ordinarily the buyer, requests Euro Exim Bank to issue a standby letter of credit in favour of the beneficiary, ordinarily the seller. If the applicant defaults, by not making payment or by not delivering as agreed, the beneficiary can present compliant documents to Euro Exim Bank to receive payment under the standby letter of credit. It serves as a guarantee of performance or payment rather than a primary payment method.
Two types are issued. A shipping or trade standby letter of credit guarantees payment of an import or export transaction. A performance standby letter of credit ensures project or contract completion as agreed. Both are used in trade contracts, project work, tenders and leasing arrangements, and both strengthen a business's standing with international counterparties while protecting each side against non-performance or default.
The applicant submits an application, the underlying agreement and other necessary documentation. Euro Exim Bank reviews the application and conducts its due diligence on the risk involved, which may include the applicant's financial standing, business reputation and ability to fulfil the terms of the instrument. A draft instrument and a quote follow. Once issuance fees are paid, the standby letter of credit is issued to the advising bank in the beneficiary's country. If it expires without being drawn upon it becomes null and void, and depending on the agreement it may be renewed or extended. Once obligations have been fulfilled or the instrument has expired unused, it is closed and any collateral or security provided by the applicant is released.
Onboarding comes first. A member of the team makes contact within two working days of an enquiry and provides an E-KYC consent letter and a request to begin the KYC process. The E-KYC fee is non-refundable and is not adjusted against issuance fees, and third-party payments are not accepted. Once the fee is paid, the required documents are uploaded through the client KYC portal, where a third-party provider reviews the submission and advises on anything outstanding.
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Frequently asked questions
Is a standby letter of credit the same as a bank guarantee?
They do the same job and are read under different rule sets, and in practice the difference that matters is what your counterparty's bank is accustomed to accepting. A standby is more common where the parties or their banks are used to letter of credit practice. A guarantee is more common in construction, supply and tender work. Euro Exim Bank issues both, and the instrument is usually chosen to match what the underlying contract already asks for.
Can the beneficiary be a financier or a third party rather than my supplier?
No. The beneficiary must be the counterparty to the underlying transaction, meaning the party you are buying from, selling to, or carrying out the project with. A standby letter of credit is issued against an identified obligation, so the underlying agreement has to be a sale, supply or project contract between the same two parties named on the instrument. This is why the applicant and the beneficiary cannot be, for example, an importer on one side and an unrelated financier on the other: there is no obligation between them for the standby letter of credit to stand behind.
What do you look at before issuing?
Financial standing, business reputation and capacity to meet the terms of the instrument, assessed against the underlying agreement you submit. Full KYC is completed before a draft instrument is produced. Euro Exim Bank does not shorten its AML, KYC and CFT process for anyone, and that is the part of the process that is not negotiable.
What happens if it is never drawn on?
It becomes null and void at expiry. Once all obligations under it have been met or the instrument has expired undrawn, it is closed and any collateral or security provided by the applicant is released. Where the underlying agreement calls for it, a standby letter of credit can be renewed or extended rather than reissued.