STANDBY LETTER OF CREDITRiley Finance & Leasing Ltd
STANDBY LETTER OF CREDIT
Standby letter of credit- Financing a business is not always easy to come by but it is important to look down every avenue of opportunity. You might not be aware of one of the most powerful financing tools out there.
Standby letter of credit (SBLC or SLOC) can help your business in tough contractual and financing solutions, making people more likely to sign contracts and also do business with you.
WHAT IS A STANDBY LETTER OF CREDIT?
An SBLC/SLOC is a genuine guarantee of payment by a bank on behalf of their client. It is a loan of last resort in which the bank fulfills payments obligations by the end of the contract if their clients cannot.
The standby letter of credit is never meant to used but to prevent contracts from going unfulfilled in the event your company closes down, declares bankruptcy or is unable to pay for goods or services provided. SBLC/SLOC help prove a business credit quality and repayment abilities.
TYPES OF SBLC/SLOC
Performance SLOC ensures the non-financial contractual obligations( quality of work, amount of work, time, cost etc) are performed in a timely and satisfactory manner.
If these obligations are not met, the bank will pay the third party in full.
This ensures contractual obligations are fulfilled.
Most SBLCs are financial. Financial SBLCs are often required when performing international trade or other large purchase contract under which other forms of payment protection (such as litigation in the event of non-payment) can be difficult to obtain.
HOW TO OBTAIN A SBLC/SLOC
The SBLC is similar to that of obtaining a commercial loan, with a few key differences. As with any business loan, you will need to provide proof of your credit worthiness to the bank.
However, the SLOC approval process is much quicker with letters often being issued within 3-7 working days of all paper works being submitted.
The bank will require a SBLC/SLOC fee of between 1-10% of the amount before issuing the letter of credits is in effect. If the terms of the contract are fulfilled early, you cancel the SBLC/SLOC by incurring additional charges.
SBLCs/SLOCs help to establish trust with your business partners and be a powerful tool to help meet your business goals.
Talk with us at https://www.rileyfinance-leasingltd.com/apply-for-loan/ about how you can obtain and use a SBLC/SLOC for the growth and expansion of your business.