A standby letter of credit is a legal payment assurance given by a bank or a financial institution to the beneficiary against any default made by its applicant (buyer). In simple words, the issuing bank guarantees the fulfillment of the buyer’s contractual obligations in case of the buyer’s incapability and offers the security of payment to the seller by reimbursing the full or remaining amount.
Unlike other types of LCs (Letters of Credit), SBLCs are secondary payment instruments whereby the banks are only required to make the payment in the event if the buyer defaults. In the case of LCs, the banks make the payment first and then recover it from the applicant at a later date. It is one of the most used trade finance instruments in international trade transactions. The issuance of standby LCs will only take effect if the applicant defaults on its duties mentioned under the SBLC contract. To conclude, we can say that it is a legal document where a bank guarantees an on-time payment to the seller in case the buyer is at default.
Read more: https://www.axioscreditbank.com/blogs/standby-letters-of-credit-meaning-its-types
Letters of credit – Knowing the different typesGenerally the international traders need help of financial intermediaries like banks for guaranteeing payments and also the assurance of delivering goods on time.
Letters of credit usually accomplish their goal by playing the role of a substitute to the credit of the bank to that of the client mainly for facilitating trade.
Such a letter is issued by a bank to guarantee full payment and timely payment to the seller.
Under a circumstance where the buyer is not able to make such a payment, the bank will either cover the entire amount or the remaining amount on the buyer’s behalf.
This letter is granted against a pledge of cash or securities as collateral.
Banks also collect a fee which is a percentage of the total amount of letter of credit.
5 Common Mistakes of Forex Trading
Starting off, it is common to make mistakes in any venture you delve into.
When you trade well, you profit big, and when you trade badly, you lose greater.
There are some common mistakes of Forex Trading you can avoid as a forex trader, and radically increase your chances of profits.
Here are 5 common mistakes of forex trading, which you should avoid in trading the Forex:
Treating Trades Like A Gamble:
