Standby Letter

of Credit for Traders

Types of SBLC's

A Standby Letter of Credit (SBLC) is a financial guarantee issued by a bank on behalf of a buyer, ensuring that payment will be made to the seller if the buyer fails to meet their contractual obligations. Unlike a standard Letter of Credit (LC), which is a primary payment method, an SBLC acts as a backup mechanism, only payable in case of default. Here’s why an SBLC is beneficial for traders:

  • Transferable SBLC

    A transferable standby letter of credit (SBLC) is a type of SBLC that allows the original beneficiary (the first beneficiary) to transfer their rights under the SBLC to one or more secondary beneficiaries. This is commonly used in transactions where intermediaries, such as brokers or trading agents, need to pass on the financial assurance provided by the SBLC to another party, such as a supplier or subcontractor.

  • Revolving SBLC

    A revolving standby letter of credit (SBLC) is a financial instrument that allows the credit limit or guarantee amount to automatically replenish after it has been utilized, up to a predefined number of cycles or a total amount. It is particularly useful in long-term contracts or ongoing transactions where repeated guarantees are required.

  • Back to Back SBLC

    A Back-to-Back Standby Letter of Credit (SBLC) is a financial instrument often used in international trade to facilitate complex transactions between multiple parties. It involves the issuance of two separate SBLCs, one depending on the other, to act as a guarantee for different aspects of the transaction.

  • Pre Advice MT799

    Pre-Advice MT799 refers to a message type within the SWIFT financial messaging system used to indicate intent or provide preliminary information about an upcoming financial transaction. It's not a legally binding document but serves as a precursor to more formal messages like the issuance of a Standby Letter of Credit (SBLC) or Bank Guarantee (BG).

  • Issuance Procedure For SBLC

    Our modus operandi is standard banking practices and is transparent as stated below:


    • Client will send us the Filled, Signed and Sealed SBLC application form (attached below) along with supporting documents like Copy of contract between Applicant and Beneficiary. We will prepare and send the draft of SBLC as per the application form and the underlying document requirement.
    • Client should conclude with their Beneficiary using the draft provided by us. Once the draft is concluded, Client should send us the following:
    1. Final draft with their sign and seal;
    2. Letter of Interest confirming acceptance for the draft and advising us to proceed further;
    3. Their Bank statement evidencing the availability of funds to cover the issuing cost.
    • Upon receiving the above stated 3 documents, the standard Indemnity Documents to be signed by the individual directors/shareholders, Board resolution to be signed by all directors/shareholders, Bill of Exchange to be signed by the authorised signatory, source of funds to be signed by authorised signatory and application and agreement to be signed by the authorised signatory, all these will be provided to the Client.
    • The Client has to submit the KYC documents as per the list we provide as a part of KYC and AML compliances.
    • Also an eKYC declaration letter will be given to Client, which needs to signed and sealed and sent back to us.
    • Once we receive the Signed eKYC declaration letter, we will issue an invoice of 1,500 USD for eKYC which client needs to pay.
    • Upon receipt of this payment we will release a eKYC link to client
    • Client needs to submit all the signed and sealed filled up documents, on the eKYC link/portal shared by us after which our KYC and Compliance team will review the documents.
    • Our KYC & compliance team will confirm if the submitted documents are in order and if yes, we will issue an invoice to Applicant, from the Bank towards the issuing fees (which is non-refundable after issuance of the instrument to the beneficiary bank)
    • After Client transfers the issuance fees, within 7 - 10 banking days we will get the instrument issued and it will be delivered to the Supplier/Beneficiary bank.
    • End of transaction up to issuance.

1. Risk Protection and Payment Assurance

An SBLC provides a safety net for the seller, assuring them that they will still be paid if the buyer is unable to meet their commitments. This protection is especially valuable in high-stakes transactions or when working with new or international partners.


2. Builds Trust Between Trade Partners

By securing an SBLC, buyers can demonstrate their financial stability and commitment to the contract. This assurance strengthens relationships with sellers, as it signals reliability and financial backing from a reputable bank, making sellers more comfortable with the terms.


3. Facilitates Global Trade Deals

In international trade, where parties may have different legal and financial systems, an SBLC mitigates uncertainties and builds confidence. This assurance makes it easier to conduct business across borders and can help smaller businesses expand globally by providing an added layer of security to suppliers.


4. Improves Negotiating Power for Buyers

With an SBLC, buyers often gain stronger negotiation leverage. Since sellers feel confident in payment protection, they may be more willing to offer favorable pricing, extended credit terms, or priority service.


5. Supports Cash Flow and Working Capital Management

An SBLC allows buyers to manage their cash flow more effectively by eliminating the need for upfront payments. Payment is only made if the buyer defaults, which means buyers can keep working capital in hand for other business needs while securing the transaction.


6. Legal Framework and Compliance

SBLCs are governed by standardized international rules, such as the International Chamber of Commerce’s ISP98 (International Standby Practices) or UCP 600, which adds a layer of legal protection and reduces potential disputes.


7. Versatility for Various Uses

Standby Letters of Credit are versatile and can be used for a range of purposes beyond trade payments, including performance guarantees and project financing. This flexibility makes them valuable for transactions where multiple assurances are required.


In summary, an SBLC helps traders manage risk, maintain liquidity, and build trust, making it a powerful tool for securing international trade transactions.