In today’s era, SBLC has popped as a popular term in the world of funding. But it is still not common among this generation. SBLC or Stand By Letter of Credit is a legal document issued by a bank, guaranteeing payment on behalf of its client to provide undertaking of his/her propensity to perform under the terms and conditions of a contract between a client and the third party. Commercially, this is also used as a ‘payment of last resort’ if the client fails to fulfill a contractual commitment with a third party.
How can you apply for a Standby Letter of Credit?
There are numerous perspectives that a bank will contemplate while applying for a Standby Letter of Credit, nonetheless, the important part will be whether the sum that is being ensured can be reimbursed. Basically, it is an insurance component to the organization that is being contracted with.
Steps for application:
Other standard due diligence questions are being asked, as well as requests for information about the business ‘ assets and possibly even the owners. The bank will typically provide a letter to the business owner upon receipt and review of the documentation. Upon receipt of the letter, the business owner will pay a fee for each year that the Standby Letter of Credit remains outstanding.