A Standby Letter of credit (SBLC) is a guarantee of payment issued by a bank on behalf of the African importer or buyer in favour of a beneficiary. A SBLC is an irrevocable commitment by the issuing bank to make payment to the beneficiary if the buyer fails to meet the obligation.
The Standby Letter of Credit is mainly used by buyers to assure exporters of their creditworthiness and ability to pay by covering payment through an SBLC.
A SBLC is not used as means of payment but acts in the background as a guarantee that should a buyer not /pay, a claim can be made under the Standby Letter of Credit.
A SBLC is not only used to cover a seller against payemement default but can also cover the risk of performance of a contractor in favour of a buyer, the called performance SBLC consisits of an obligation by a bank to pay the beneficiary on the failure of the purchaser to fulfill any contractual obligations.
TRADEFINANCE.AFRICA COUNTRIES OF EXPERTISE