What is a standby letter of credit (L/C)?

Answer by  Christian9247 (5042)

A standby letter of credit is when a company has a credit line backing by a bank or other recognized financial institution. This is to back any major contracts.

Answer by  srainne (2597)

This type of letter of credit is usually a substitute for a performance bond or payment guarantee and is used primarily in the US where banks are barred from issuing certain types of guarantees. It serves as a payment source in case the primary source fails to meet its obligations.

Answer by  StarOne (941)

A standby letter of credit is issued by a third party, usually a bank or other financial institution, stating that if the client fails to pay their debt they will issue credit to their client to cover the debt. These letters are a sign of good faith by the bank for their clients.

Answer by  Jon65 (787)

A guarantee of payment issued by a bank on behalf of a client, which shall be used to pay a third party if the client defaults on contractual obligation.