The Standby Letter of Credit (SBLC) is also called “documentary letter of credit” (DLC). It is a term widely used to secure payments in national and international trade. It is easy to implement and manage and it is an adapted guarantee that can be used for transactions or specific operations with commercial partners that are known and frequent.
Letters of credit can protect the seller from a buyer that they feel uneasy about. This guarantees that they will get their money no matter how shady of a buyer they think they are dealing with.
There are many uses of these letters, including supporting the payment of obligations or contracts, optimizing cash flow and liquidity, maintaining capital, making new business relationships easier, and maintaining your investment strategy. Investing in these letters can be risky business, but does collect a percentage of the amount at the creation of the letter plus the interest if the buyer doesn’t pay.
Many securities dealers use these letters of credit to ensure their securities. They can also be used by the buyers or traders of securities to ensure their value. The letter becomes an investment tool to protect assets. The letter does reduce the risk of an investment, but it can also be a false sense of security.
Some of the characteristics of SBLC Monetization
SBLC are also flexible:
There is no much need of paper work between the exporter and importer in order to show their commitment.
It is inexpensive:
In SBLC rate will be set in function of the risk of the country and the quality of the issuing bank.
Risk-free:
SBLC works as a guarantee in case if something goes wrong. It gives peace of mind to those who use it.
Banking Instruments Professionals 