Arasan - Trade Finance Consultant

  A standby letter of credit (SBLC) is a financial instrument that serves as a guarantee to ensure that a specific obligation is fulfilled. It is commonly used in international trade transactions where there is a significant amount of risk for both the buyer and seller. An SBLC is issued by a bank on behalf of a buyer (the applicant) in favor of a seller (the beneficiary). The purpose of the SBLC is to provide assurance to the seller that payment will be made in the event that the buyer is unable to fulfill their payment obligations. If the buyer defaults, the seller can draw on the SBLC to receive payment from the issuing bank. There are two main types of SBLCs: performance SBLCs and financial SBLCs. A performance SBLC is used to guarantee that the buyer will fulfill their contractual obligations, such as completing a construction project or delivering goods on time. A financial SBLC is used to guarantee payment for goods or services. To obtain an SBLC, the applicant must provide ...

  A letter of credit (LOC) is a financial instrument that provides a guarantee of payment from a bank or other financial institution. It is commonly used in international trade transactions to reduce risk and provide security for both the buyer and seller. In this blog, we will explore the basics of a letter of credit, including how it works, types of LOC, and its benefits. How a letter of credit works A letter of credit is essentially a document issued by a bank on behalf of a buyer, which guarantees payment to a seller. It serves as a promise of payment, ensuring that the seller will receive the agreed-upon amount of money if they fulfill the terms of the agreement. Here's how it typically works: The buyer and seller agree on the terms of the transaction, including the price, quantity, and delivery date. The buyer applies for a letter of credit from their bank, providing all the necessary information about the transaction. The bank issues the letter of credit to the seller, guara...