How much does an SBLC cost?
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Contact: Eugene M Edwards (Senior Consultant)
Contact: Warren Wimslow (Consultant)
Everyone loves safety nets, especially if they can support you when you need to secure a huge contract.
That’s where an SBLC comes in. But what is an SBLC? What does it cost? And can it be cancelled?
All these questions are wholly logical and burning to be answered, so let’s jump in without further ado.
What is an SBLC?
An SBLC is a ‘Standby Letter of Credit’ and is issued by a bank on behalf of a client as a guarantee to ensure payment in case the client cannot fulfil a contractual commitment with a third party.
While this is a near-perfect security net, it is also issued only as a last resort, ideally never used. Furthermore, there are some limitations the client faces that we will now explore.
What does an SBLC Cost?
The standard fee ranges from 1% to 10% of the Standby Letter of Credit value.
Of course, the actual SBLC cost depends on various factors, including the length of time wherein the SBLC would be valid (which averages out to four months) and the different risks associated with the contract under consideration.
Can an SBLC be Cancelled?
But suppose you have an SBLC, but you want to cancel it. Is it possible? Yes, indeed
All you need is a written confirmation by the beneficiary that they no longer intend to use the SBLC and the issuing bank’s agreement and the confirming bank.
This also ensures the bank cannot cancel the letter by themselves, which adds another security layer.
At the end of the day, an SBLC is a way to work towards safer and better contractual commitments.
Therefore, knowing about SBLC fees and their cancellation policy is fundamental to ensuring your economic and monetary security.