What is Standby Letter of Credit?

A standby letter of credit (SBLC) is a guarantee of payment issued by a bank on behalf of a client that is used as "payment of last resort" should the client fail to fulfill a contractual commitment with a third party.

Trade finance company

Standby letters of credit are created as a sign of good faith in business transactions and are proof of a buyers’ credit quality and repayment abilities.

The institution issuing the SBLC performs compliance and brief underwriting duties to ensure the credit quality of the party seeking the letter of credit, then sends notification to the bank of the party requesting the letter of credit (typically a seller or creditor).

Importantly, when requesting a SBLC, a business owner proves to the bank he is capable of repaying the loan. Collateral such as promissory notes, post-dated cheques and Escrow deposits will be required to protect the bank in case of default. The business owner must pay a SBLC fee for each year that the letter is valid. The negotiable fee is typically 5-10% of the SBLC value.

Complete your application process in 6 easy steps
  • Applicant sends us underlying contract (Ex: Sales Contract / pro-forma invoice).
  • EEB will create a draft instrument and send a quote with our charges (to be paid in advance).
  • Once the draft has been accepted, we send the indemnity (KYC/AML/due diligence) documents which need to be signed and notarised by a lawyer.
  • We also send you a formal invoice for our indemnity process and issuance charges.
  • Once we receive our charges and all DD checks are completed and approved, along with all indemnity documents, we will SWIFT the instrument to the beneficiary's bank immediately.
  • Beneficiary is paid at least 14 days before the expiry date (Up to 2 years from SBLC issue date).

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(Euro Exim Bank is in compliance with General Data Protection Regulation (GDPR) introduced across Europe on 25 May 2018.)