1. With the help of SBLC letter of credit establishing a new trade relationship or transact with unknown partners become easy. It also provides huge help to expand ones business to new area quickly.
2. Another advantage of standby letter of credit is it highly customizable. In the letter of credit both of the trading partner can put their required terms and condition and make it a mutually exclusive list of clauses. Between the same trading partners it also gives ability to customise from one transaction to another.
3. A standby letter of credit gives the issuing bank to stay independent from any kind of obligations and disputes arising between the partners. In order to pay the full amount the issuing bank only need to check if the documents submitted by the beneficiary meet with the terms and conditions specified in the standby letter of credit.
4. The issuing bank receives the credit-worthiness from the buyer by standby letter of credit and in case if the buyer is backed by an established and larger institution such as a bank or large financial company then they can do multiple transactions at the same time.
5. The standby letter of credit is a very safe way for seller to receive payment if there is a chance of buyer going bankrupt. The amount of credit worthiness transferred from the buyer to the issuing bank beforehand, so even if the buyer goes bankrupt the seller will receive the full payment from the issuing bank. In other words a standby letter of credit makes the seller insulates from the buyer’s business risk.
6. The letter of credit can be quickly executed. To receive the full payment from the bank, the seller has to present the proof of material type and quantity along with the shipping documents which support claim of shipping the good. And after the issuing bank verified all of these documents, the seller will receive the payment instantly.
7. A standby letter of credit is very beneficial to seller as in case of any disputes between the trading parties the seller can withdraw the fund according to the terms and conditions of letter of credit and goes to court later to resolve their dispute.
8. A standby letter of credit gives guarantee to the seller of receiving the full payment in a certain time. So they can plan their financial need in advance.