Thursday, 30 March 2017

How Does SBLC Work?


When you are doing a business or you are involved in any big investments, anything can go wrong with the finance and it is very important for you to have a backup plan. The Standby letter of credit is one of the best back up plan you can have for yourself. It can provide you protection whether you are purchasing a completed service or shipping physical goods.

SBLC is one basically a document that is issued by the bank and the letter saves you. You can get the guarantee from the bank saying they will be paying the beneficiary amount if anything goes wrong with your finances.

These can be used both in domestic trades as well as international trades. The SLBC helps you to pay the beneficiary amount when you are unable to make the payment on time, or complete the project on time, or you are unable to satisfy any of the terms and conditions of the agreement.

What are the types of the SBLC?

There are a lot of types of SBLC. These are –

1.    Performance Standby – This standby letter of credit provides an obligation to perform and not to pay the money on behalf. For instance, you are unable to complete the task, your bank will do the task on behalf of you rather than paying money in order to cover the losses.

2.    Advance Payment Standby – This SBLC supports an obligation to account for an advance payment made by the beneficiary to the applicant. This basically helps you as the bank already makes an advance payment on your behalf as SBLC letter of credit.

3.    Tender standby/Bid Bond – If the applicant is awarded a bid, this SBLC is obligated to execute a contract.

4.    Counter standby – This is another form of SBLC which favors the issue of another standby or a separate undertaking by the beneficiary of the counter standby.

5.    Direct Pay Standby – The SBLC is used to pay directly when to an obligation where the only possible condition of payment is or are the passage of the terms and conditions available on the contract.

6.    Insurance Standby – This standby basically is an insurance or a reinsurance obligation to the applicant.

7.    Commercial Standby – Commercial SBLC is one of the most used standbys as it supports the obligations of an applicant to pay for goods or services in the event of non-payment by a business debtor.

Friday, 3 March 2017

SBLC and How Does it Help You in International Trade

Any business or any person can find transactional havocs and issues and it is always wise to keep a backup plan. SBLC or Standby Letter of Credit is one of the best options you can use as a backup plan or that can provide you protection whether you are purchasing for a completed service or you are shipping any physical good.

What is SBLC?

Standby Letter of Credit is the key to protection; it is basically a letter issues by your bank which say it will pay a “beneficiary” in case you are unable to pay or something fails to happen. The bank pays the beneficiary for you if you fail to complete the project, pay on time or unable to stand up to a few terms and conditions. The standby Letter of Credit is the letter where the bank promises you the same.

Standby Letter of Credit is a great service to use as it can benefit you many ways. One of them is International Trade. However, it can also be proved beneficial in terms of domestic transactions.

How does it help you in International Trade?

As the bank is guarantying you to pay the beneficiary for you in terms of emergency, they make one thing the main purpose of their service and that is to boost you or your business’ creditworthiness.

When you are able to pay make the payments on time, then there is no way the letter of credits get drawn on. In the international market, the Standby Letter of Credit works as backup plan for you. When you are dealing in the international market, the buyers benefit from the goods and services they get in lower costs and the sellers benefit from the added demand. Here, Standby Letter of Credits plays the role of backup payment mechanism.

Banks that provide Standby Letter of Credit are likely to get more customers as they provide you amazing international trading opportunities.

How to get an SBLC?

You can simply ask your bank or your finance company to provide you one. But make sure you understand all the terms and conditions first; then you proceed further with everything.

Any bank instrument proves to be quite beneficial for monetizing and there is no doubt about it. There are a lot of companies other than banks, who provide bank instruments at your service. “The Hanson Group of Companies”, one of the well-known lease BG SBLC providers.