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What is the difference between a Bank guarantee and standby letter of credit?
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∙ 11y ago
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What is the different between letter of credit and standby letter of credit?
A letter of credit is used as a method to facilitate payment of international trade transactions (ie: the import/export of goods/services).Unlike a trade letter of credit, a standby letter of credit is NOT meant to be used for payment. A standby letter of credit is used as a form of "back-up" guarantee (hence the name "standby") used for a variety of purposes.There are two types of standby letters of credit: Performance Standby L.C. and Financial Standby L.C.Performance Standby's are used to guarantee some sort of performance of a contractual obligation. For example, a construction company building a highway bridge might be required by the highway department to put up a performance standby letter of credit ensuring that they will complete the project contracted or to warranty the work. Under normal circumstances the standby would not be drawn upon, however if the contractor abandoned the project midway through completion or if the bridge were unsafe, the standby letter of credit could be drawn upon for its specified dollar amount.A Financial Standby Letter of Credit is similar in concept to the Performance Standby, but instead acts as a guarantee for payment of financial obligations.For example, companies trading on securities markets are frequently required to have financial standbys in place benefiting the particular stock market exchange which can be drawn upon if they are for whatever reason unable to settle their trades at the end of the day.Financial standby's can also be used in international trade, but in a different manner than standard letters of credit.Normal trade letters of credit are intended to be used for pre-specified shipment(s) of goods or services. The letter of credit requires documents specifically evidencing the trade transaction itself and the letter of credit serves as the vehicle for payment of the trade transaction.When financial standby's are used for trade purposes, they are not intended as a means of payment, but as with all standby's, act as a "back-up" guarantee.Financial standbys frequently are used between buyers and sellers who have frequent, ongoing trade shipments for an extended period of time. The standby acts as a blanket guarantee for the overall obligations of the buyer to pay and does not contains specifics related to any one particular shipment.
Standby letter of credit?
The Standby letter of credit serves as a secondary payment mechanism. A bank will issue a standby letter of credit on behalf of a customer to provide assurance of his ability to perform under the terms of a contract between the beneficiary
What is the difference between letter of credit letter of guarantee?
Both Letter of Credit and Letter of Guarantee are commitment to payment by the issuer of the instrument (generally a Bank). In letter of credit, the issuer has to fulfill his commitment on fulfilling the terms and conditions of the letter of credit by the beneficiary. Whereas, on the other hand, in letter of guarantee the issuer has to make payment, when the beneficiary is unable to fulfill the terms & conditions of the letter of guarantee.
What's the difference between a bank guarantee and a letter of credit?
Letter of credit is a financial paper for guaranteed payments, whereas a bank guarantee is a guarantee given by the bank to the beneficiary on account of the applicant, to begin payment if the applicant defaults in payment. If you're looking for one, then Pepagora Trade Finance offers these services
What is difference between rural credit and micro credit?
What is the difference between micro credt and rural credit?
What is the different between letter of credit and standby letter of credit?
A letter of credit is used as a method to facilitate payment of international trade transactions (ie: the import/export of goods/services).Unlike a trade letter of credit, a standby letter of credit is NOT meant to be used for payment. A standby letter of credit is used as a form of "back-up" guarantee (hence the name "standby") used for a variety of purposes.There are two types of standby letters of credit: Performance Standby L.C. and Financial Standby L.C.Performance Standby's are used to guarantee some sort of performance of a contractual obligation. For example, a construction company building a highway bridge might be required by the highway department to put up a performance standby letter of credit ensuring that they will complete the project contracted or to warranty the work. Under normal circumstances the standby would not be drawn upon, however if the contractor abandoned the project midway through completion or if the bridge were unsafe, the standby letter of credit could be drawn upon for its specified dollar amount.A Financial Standby Letter of Credit is similar in concept to the Performance Standby, but instead acts as a guarantee for payment of financial obligations.For example, companies trading on securities markets are frequently required to have financial standbys in place benefiting the particular stock market exchange which can be drawn upon if they are for whatever reason unable to settle their trades at the end of the day.Financial standby's can also be used in international trade, but in a different manner than standard letters of credit.Normal trade letters of credit are intended to be used for pre-specified shipment(s) of goods or services. The letter of credit requires documents specifically evidencing the trade transaction itself and the letter of credit serves as the vehicle for payment of the trade transaction.When financial standby's are used for trade purposes, they are not intended as a means of payment, but as with all standby's, act as a "back-up" guarantee.Financial standbys frequently are used between buyers and sellers who have frequent, ongoing trade shipments for an extended period of time. The standby acts as a blanket guarantee for the overall obligations of the buyer to pay and does not contains specifics related to any one particular shipment.
Standby letter of credit?
The Standby letter of credit serves as a secondary payment mechanism. A bank will issue a standby letter of credit on behalf of a customer to provide assurance of his ability to perform under the terms of a contract between the beneficiary
What is the difference between letter of credit letter of guarantee?
Both Letter of Credit and Letter of Guarantee are commitment to payment by the issuer of the instrument (generally a Bank). In letter of credit, the issuer has to fulfill his commitment on fulfilling the terms and conditions of the letter of credit by the beneficiary. Whereas, on the other hand, in letter of guarantee the issuer has to make payment, when the beneficiary is unable to fulfill the terms & conditions of the letter of guarantee.
What is difference between rural credit and micro credit?
What is the difference between micro credt and rural credit?
What's the difference between a bank guarantee and a letter of credit?
Letter of credit is a financial paper for guaranteed payments, whereas a bank guarantee is a guarantee given by the bank to the beneficiary on account of the applicant, to begin payment if the applicant defaults in payment. If you're looking for one, then Pepagora Trade Finance offers these services
Who is SBLC?
SBLC (Standby Letter of Credit) A Commercial Letter of Credit is taken as Guarantee to be used in payment of goods and services. The Standby Letter of Credit issued is taken as guarantee that the applicant, the customer of issuing bank will execute responsibilities under an agreement. In other words, if an applicant fails to meet the promises made, the beneficiary draws on standby. According to the Controller of Currency, Standbys defined as, 'any letter of credit or a similar document issued which mentions responsibilities to the beneficiary on the side of issuer. The SBLC (Standby Letter of Credit) mentions details regarding- 1. To pay back the money borrowed or advanced to or for the account of the account party. 2. To pay on account of an indebtedness undertaken by the account party 3. To pay in case of default by the account party in meeting of any promises made.
What is the difference between installment credit and open ended credit?
the difference between installment credit and open ended credit is they are the same..
What is a credit substitute guarantee?
non credit substitute guarantee
What is the difference between a bank loan and a bank credit?
What is the difference between bank loan and bank credit?
Is Standby Letter of Credit always cash backed?
no, we can issue standby letter of credit to clients with such credit facilities. although it may be backed with trust receipt depending on the credit standing of the client. cbctsdp trainee
What is difference between specific guarantee and continuing guarantee?
Definition of "Continuing Guarantee"A continuing guarantee is a guarantee where the guarantor assumes liability for any past, present and future obligations owed by a debtor to a lender or creditor. Even where the amount owing has been completely paid, the guarantor can still be liable under that line of credit if there is a subsequent indebtedness. Also known as a continuing guaranty. A common example is a guarantee for a revolving line of credit. specific guaranteeWritten undertaking to fulfill a specific obligation. Also called specific guarantee.
What does SBLC mean in terms of international trading?
SBLC stands for 'stand by letter of credit'. The standby letter of credit serves a different function than the commercial letter of credit. The commercial letter of credit is the primary payment mechanism for a transaction. The standby letter of credit serves as a secondary payment mechanism. A bank will issue a standby letter of credit on behalf of a customer to provide assurances of his ability to perform under the terms of a contract between him and the beneficiary. The parties involved with the transaction do not expect that the letter of credit will ever be drawn upon. The standby letter of credit assures the beneficiary of the performance of the customer's obligation. The beneficiary is able to draw under the credit by presenting a draft, copies of invoices, with evidence that the customer has not performed his obligation. The bank is obligated to make payment if the documents presented comply with the terms of the letter of credit. Standby letters of credit are issued by banks to stand behind monetary obligations, to insure the refund of advance payment, to support performance and bid obligations, and to insure the completion of a sales contract. The credit has an expiration date. The standby letter of credit is often used to guarantee performance or to strengthen the credit worthiness of a customer. In the above example, the letter of credit is issued by the bank and held by the supplier. The customer is provided open account terms. If payments are made in accordance with the suppliers' terms, the letter of credit would not be drawn on. The seller pursues the customer for payment directly. If the customer is unable to pay, the seller presents a draft and copies of invoices to the bank for payment. The domestic standby letter of credit is governed by the Uniform Commercial Code. Under these provisions, the bank is given until the close of the third banking day after receipt of the documents to honor the draft.
