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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 payment. When you and the buyer 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 buyer. Should some of the buyer's obligations need to be secured, the buyer will request his bank to issue a Standby Letter of Credit in your favour.
Your benefits with Standby Letter of Credit
- you secure payment
- you can obtain advance payment
- you can offer credit and/or obtain financing
- you secure compensation for non fulfilment of any important obligations
*) Issuance requires credit approval of Nordea.
