Hey friend,
There are numerous trade finance instruments used in national and international markets. I have researched all of them and made a table on SBLC vs LC. Before I begin, let me share the full form of both acronyms. SBLC stands for Standby letters of credit and LC stands for a letter of credit.
Get home loans instantly through NoBroker What is the difference between LC and SBLC? Letter Of Credit meaning :A letter of credit is a legal document issued from the bank to the exporter/seller on behalf of the importer/buyer. It is a promise that the importer will complete his contractual obligations and make the necessary payment.
Standby Letter Of Credit Meaning:It is a payment method wherein the bank acts as a guarantor. It comes into action when the buyer defaults and does not make payment to the seller. As long as the terms & conditions of the Standby LC agreement are met by the seller, they will receive the restitution amount from the bank.
Take a look at the table below to know more difference between LC and SBLC :
SBLC |
LC |
contains requirements imposed by the buyer for the seller to be completed while executing the deal. |
does not contain any requirements imposed by the buyer for the seller to be completed while executing the deal. |
The bank asks for collateral in the form of security to issue an SBLC. |
The bank does not ask for any collateral in the form of security to issue an LC. |
It is referred as secondary instrument of payment |
It is referred as primary instrument of payment |
It is a long -term instrument that expires after 1 year |
It is a short-term instrument that usually expires within 90 days |
It is commonly used in construction projects and domestic transactions. |
It is commonly used in sale agreements. |
The cost of issuing a Standby LC is more than a regular LC.It usually covers 1% to 10% of the amount. |
The cost of issuing a regular LC. is less than a Standby LC. It usually covers 0.75% to 1.50% of the amount. |
This is all from my end on SBLC vs LC
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What is the difference between sblc vs lc?
Devi
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2 Year
2022-11-22T11:10:52+00:00 2022-11-22T11:10:56+00:00Comment
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