Five Facts About the SBLC Bank Guarantee

To obtain the SBLC you need to apply to your bank and meet the standards that prove you are a worthy customer. You will also need to include a collateral fee. SBLC bank guarantee is an LC where the creditworthiness of a customer is exchanged with that of a bank. It states that a bank will pay a creditor in a case where the bank’s customer can’t meet up with the payment. Some other things you need to know before applying for an SBLC have been listed below.

Backup Payment Plan

The SBLC is a backup plan that ensures the creditor or seller in a transaction gets his pay once due. However, if the bank’s client fails to make the payment when due to the bank can under no circumstance fail or refuse to pay.

Backup Payment Plan

Bank Expectation and Time Frame

One thing the SBLC does is that it certifies the applicant’s ability to pay in due time and so at the end of the day if the bank ends up making the payment to the creditor or seller, the bank expects to be paid back by the requesting customer. Usually, the time frame the SBLC runs is for a year which gives the applicant ample time to make payment.

Bank Procedure

It should be noted that most sellers request for an irreversible letter of credit, which means that the letter cannot be tampered with without the bank’s consent. To be considered a worthy applicant for the SBLC, you are required to pay as collateral at least 2-5% of the amount of the SBLC and a token fee to the issuing bank.

Bank Procedure

The SBLC Is Transferable

The creditor can decide to give the right to the proceeds of the SBLC to any party he decides but has to inform the bank of the new development.

The Forth Party

It should be noted that in most international transactions, apart from the bank, the bank’s customer and the creditor there is a fourth party who is in charge of paying the creditor on behalf of the bank once the SBLC becomes due.