an obligation issued by a bank on behalf of a customer to a third party, states that the bank will pay the latter upon presentation of a statement signed by the beneficiary stating that the bank's customer has not fulfilled the terms of the contract
A written instrument issued by a bank (Issuing Bank) at the request of its customer (Applicant) on behalf of a beneficiary, whereby the Issuing Bank agrees to provide financial remedy in the event that the Applicant defaults on any terms and conditions specified under the Standby Letter of Credit. Standby Letters of Credit are often issued at the request of Importers in favour of Exporters as financial security for goods purchased on Open Account.
guarantee of the payment of a fixed amount where the debtor has not met its payment obligations.
A letter of credit used as an alternative to a Guarantee. A Standby is generally used to protect the beneficiary against the applicant’s failure to fulfil a financial obligation, as opposed to a trading obligation.
Agreement to guarantee invoice payments to a supplier; a standby LOC promises to pay the seller if the buyer fails to pay.
As opposed to a commercial letter of credit, a letter of credit that does not cover the direct purchase of merchandise, so called because it is often intended to be drawn on only when the applicant for whom it is issued fails to perform an obligation. There is, nonetheless, a type of standby letter of credit that is intended to be drawn on, referred to as a "direct pay letter of credit." Standby letters of credit are based on the underlying principle of letters of credit that payment is made against presentation of documents¾ whatever documents the applicant, beneficiary, and issuing bank may agree to, not necessarily documents showing shipment of goods.
a bank-issued conditional payment typically used in lieu of a cash security deposit on a lease or as an alternative to a performance bond
a bank promise to pay the third party in the event of some defined failure by the bank's customer, usually, but not always, a failure to pay
banking) The standby letter of credit is very similar in nature to a guarantee. The beneficiary can claim payment in the event that the principal does not comply with its obligations to the beneficiary. Payment can usually be realized against presentation of a sight draft and written statement that the principal has failed to fulfill his/her obligations.
A letter of credit that is payable to the beneficiary against stipulated documents that usually refer to a default or nonperformance by the account party.
A Letter of Credit, similar to an on-demand guarantee, under which drawings are contingent upon a particular event or set of circumstances occurring or failing to occur.
A letter of credit which is usually issued as a guarantee against the non-fulfilment of a contract. Standby letters of credit do not constitute a means of payment but are a guarantee of indemnity in case of non-execution of the contract by the exporter. They are generally used to guarantee financial obligations or contractual performance obligations. Compare with Letter of credit. Français: Lettre de crédit "Standby" Español: Carta de crédito contingente
A letter of credit which a bank issues on behalf of its customer to serve as a guarantee to the beneficiary of the letter of credit that the bank's customer will perform a specified contract with the beneficiary. If the customer defaults, the beneficiary may draw funds against the letter of credit as penalties or as payments, whichever the terms of the credit provide.
A letter of credit issued to ensure the financial performance of a bank's customer to a third-party beneficiary and which is only drawn upon in the event of non-performance.
Standby Letter of Credit Static theory of capital structure