A SBLC (Stand by Letter of Credit) is a document issued by a bank, guaranteeing payment on behalf of a client, should the client fails to fulfill a contractual commitment with a third party.
ADVANTAGES:
• One of the main benefits of SBLC is the fact that it guarantees the payment of the merchandise if the importer for some reason is unable to pay.
• It is flexible: The seller transmits directly to the buyer the documents required while the buyer continues to keep the right for the merchandise, to the extent that the commercial contract allows it. The payment may be effectuated by transfers, after the documents have been sent to the importer and which will result in time gained because of the formalities of clearance.
• It is inexpensive: The importer will pay only the issuing of the freight plus a commission for the risks during the life of the SBLC. The seller, if the SBLC must be confirmed, will only pay for the confirmation for which the rate will be set in function of the risk of the country and the quality of the issuing bank.