Simple And Quick Guide On SBLC Bank Guarantee

We all use many banking services at different times of our life. Since we use banking services almost all the times it is necessary to learn about the important banking terms. Most of us would have heard about SBLC and others would have not. The Standby Letter of Credit (SBLC) is a letter issued by the bank. It is a guaranteed document where the bank guarantees the payment to the seller on behalf of the buyer to provide the assurance. The SBLC bank guarantee can be taken as the assurance of the buyer’s ability to repay the amount under the terms and conditions on the contract between the beneficiary and client.

How does SBLC bank guarantee work?

The SBLC is provided mostly during the international trade between the companies that don’t know about each other. Since both of them have different regulations and laws SBLC guarantee is provided as an assurance. The buyer has to receive the goods, as well as the seller, need to receive the payment for this the standby letter of credit will be provided. But it does not guarantee that the buyer will be happy about the goods received. The SBLC bank guarantee is a type of contract between the seller and the buyer.

The word “standby” is used because the bank will pay the seller only in the worst case where the buyer isn’t able to pay the amount due to some situations. But the seller will be guaranteed that he/she will receive the payment but the agreement must be strictly followed. For example, there must be no delay in the shipping goods or misspelling in the buyer name or company which may lead the bank to refuse in making the payment.

If you wish to receive this SBLC guarantee first you have to apply for it in the bank. After the approval, you will receive the SBLC. After reading the document both the seller and the buyer have to sign the draft. After that, both of them will get a copy of the SBLC. During this process of shipment, all the documents must be sent to the bank to know the status of the trading. When the payment for this trading is done, the whole process will get completed after a few procedures.

The SBLC guarantee is provided mostly when a large amount of money is involved in the trading process. The greatest advantage as a seller is that you will get the payment for sure. If the buyer does not pay within the time period you can use the guarantee to get the payment. This reduces the risk of getting cheated or loss of money. This also reduces the risk of cancellation of the goods by the buyer.

As a buyer, you can ensure that you receive all the goods without any delay as outlined in the document. This SBLC bank guarantee can be used when there is any risk so that it can be avoided. Also if you wish to buy a repetitively you can use this guarantee to ensure that you receive the goods at good quality all the time as a buyer. As a seller, you can have zero risks in the payment process.