LC Vs. SBLC The regular letter of credit and standby letter of credit (LC & SBLC) are payment instruments used in international trade. However, there are some basic differences in the product, which we will discuss in the following post A letter of credit is a promise from the bank that the buyer, i.e., the importer, will fulfill his payment obligation and pay the full invoice amount on time. The role of the issuing bank is to make sure that the buyer pays. In case the buyer is unable to fulfill his obligation, the bank will pay the seller, i.e., the exporter, but the funds come from the buyer. On the other hand, a standby letter of credit is a secondary payment method where the bank guarantees the payment when the seller fulfills the terms of the letter of credit. It is a kind of additional safety net for the seller. The buyer may not pay the seller for multiple reasons such as cash flow crunch, dishonesty, bankruptcy, etc. But as...
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