The Stand by Letter of Credit also known as Standby LC, SBLC, or MT760. Standby LC is a payment guarantee provided by a bank to its client. It is also a guarantee which needs to pay upon first demand without any protest or defense. It’s used as “payment of last resort” if the client fails to oblige with the Terms and Conditions of the signed Agreement. Standby Letters of Credit proves the buyer’s credit worth and payment strength. Moreover, it provides complete security of not making any payment loss. Therefore, it is a preferable financial instrument by traders and is most reliable in business transactions.
Standby LC is often used in local and international trade transactions for buying goods. MT760 can also be used as Collateral for Credit Enhancement. Thus, it is ideal for companies planning to expand their business but without giving up their equity. Hence, it improves the company’s cash flow. Also, it allows companies to use their funds for alternate purposes before payments become due.
Parties Involved In Stand By Letter Of Credit :
Applicant :
The applicant means a commercial company who is requesting their bank a MT 760 guarantee. But they should have enough cash or credit facility available in their bank account to qualify their request. Further, the bank will debit the applicant’s account in terms of the instrument’s commission, processing fee, and swift charges.
Issuing Bank :
The issuing bank is a bank that will issue the SBLC – MT760 on behalf of their client as per their agreement with them.
Beneficiary :
The beneficiary is a party in whose favor the MT 760 is issued.
Advising Bank :
The advising bank is, in fact, a beneficiary’s bank. This is the bank where the beneficiary company will receive their Standby Letters of Credit.
Advantages Of Standby LC
- It certainly effects on seller’s financial liquidity.
- It is the most secure way to cover the financial risk of the seller while giving credit to their clients.
- By this financial instrument, the seller gets a full guarantee of their payment once they comply with the terms of SBLC.
- It also provides the confidence to the seller, if in case of any sudden bankruptcy to their client.
- The seller can draw down the cash funding by pledging their MT 760 guarantee from their bank.
Can Stand By Letter Of Credit Be Transferable ?
Standby LC can be transferable subject to its terms. This is a question that most of the clients ask their bank before applying for the MT760. Other financial instruments like cheque, promissory note, etc. can be transferred or assigned in good faith of business and it has become a common practice also. Like other financial instruments, MT 760 can be transferred in favor of a second beneficiary only. However, it should be with the written instruction by the first beneficiary. And at the same time, with the consent of the issuing bank.
Being an SBLC provider, our experts will structure Standby LC to meet your business needs. Which surely will help you to protect your interests to the extent in every possible circumstance.
Black Cowrie Finance has been providing Standby Letter of Credit – SBLC – MT760 on behalf of buyers to fulfill their contractual commitment towards the suppliers.
Standby Letter Of Credit Procedure
Being a direct provider, we can support your imports and exports by providing Standby Letter of Credit – SBLC – MT760 on behalf of importer and in favor of the exporter to conclude your trade deals.
Below Is The Quick Procedure To getting Standby LC From Black Cowrie Finance :
- At first, the importer/purchaser will submit their SBLC request to Black Cowrie Finance. They should provide buy and sell agreement, Pro-forma offer of their trade deal, or just fill our Deed of Agreement and attach their compliance document.
- Black Cowrie Finance will review the commercial transaction between Purchaser and the seller. After careful study, then Black Cowrie Finance will inform the Purchaser about our consent or refusal of their SBLC request.
- After the SBLC request acceptance, we will countersign the Deed of Agreement, and give our full approval to proceed. Thus, the client will be informed about the admin charges/commitments to start work in assigning collateral with the issuer bank for the Standby LC transaction.
- The Purchaser will oblige and must meet Black Cowrie Finance commitments to issue MT760 to their Receiver bank.
- Black Cowrie Finance will act instantly and provide Standby LC from their bank account /top European Bank. This MT760 will be on behalf of the Purchaser and in favor of their seller to conclude their trade deal.
