A Standby Letter of Credit (SBLC) is a bank’s commitment of payment to a third party in the event that the banks’s client defaults on an agreement. It is a ‘standby’ agreement because the bank will have to pay only in a worst-case scenario. A SBLC can be used to guarantee the supplier in commercial transaction (import-export), to improve up the project financing structure bringing it to a bankability stage, drawn down a loan or simply to trigger a credit line from the Bank.
SBLC is a Collateral Facility which can be used also to raise funds through a so called non-recourse loan. A non-recourse loan can be structured with Monetization option only or the Owner/Lessee can have the opportunity to multiply his asset with both our option for three Bullet option (the first two of 10 Days, and the third of 30 Days) and then in Program of 10 Months. Benefits of the asset of the Customer are all for the client.
Furthermore, a SBLC is most often sought by a business to help it obtain a contract. The recipient of a standby letter of credit is assured that it is doing business with an individual or company that is capable of paying the bill or finishing the project. In the worst-case scenario, the bank issuing the SBLC will fulfill its client’s obligations.