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Standby Letter of Credit
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Normally used instead of Guarantees in trade with for instance the USA
The Standby Letter of Credit is, like the Guarantee, normally used in order to secure the fulfilment of contractual obligations such as repayment of an advance payment if no delivery is made or compensation in case of no delivery.
When you and the supplier have agreed on the contract terms, you also need to define which of the terms are to be secured by a Standby Letter of Credit. If some of your obligations are to be secured, you apply for a Standby Letter of Credit at Nordea, which then issues* it in favour of the supplier.
Should some of the supplier's obligations need to be secured, the supplier will request his bank to issue a Standby Letter of Credit in your favour.
Your benefits with Standby Letter of Credit
- you avoid or secure advance payment
- you can obtain credit
- you secure compensation for non-fulfilment of important obligations
- the banks involved will act according to the internationally accepted rules of the International Chamber of Commerce
*) Issuance requires the credit approval of Nordea.
