SBLC Cost: Standby Letter of Credit Fees Explained
What a standby Letter of Credit costs: annual commission, minimums, collateral, issuance, amendment and drawing fees — with an illustrative example and ways to reduce them.
3 min readUpdated 2026-10-13Written by LCCheck team
Short answer
An SBLC usually costs the applicant an annual commission on the amount, often quoted as a percentage per year and charged per quarter, plus issuance, amendment, advising and drawing fees. The rate depends on the applicant's credit standing, collateral, term and the banks involved. Banks may also block cash or credit lines as security, which is a cost in itself.
In this guide
| Main charge | Annual commission on the amount |
|---|---|
| Who pays | Usually the applicant |
| Also costs | Collateral or blocked credit lines |
| Varies by | Credit standing, term, banks |
Typical charges
| Charge | Basis | Usually paid by |
|---|---|---|
| Commission | % per year of the amount, often per quarter, with a minimum | Applicant |
| Issuance fee | Flat | Applicant |
| Advising fee | Flat | Beneficiary or as agreed |
| Confirmation (if added) | % per year, priced on issuing bank risk | Beneficiary or as agreed |
| Amendment fee | Flat per amendment, more for increases | Applicant |
| Drawing fee | Flat or % of the demand | As agreed |
| Collateral cost | Cash deposit or blocked facility | Applicant |
Illustrative example
Assume, purely for illustration, a one-year SBLC for USD 500,000 at a commission of 1.5% per year with a USD 500 minimum per quarter, plus a USD 250 issuance fee and USD 150 advising fee. The commission is USD 1,875 per quarter, or USD 7,500 for the year, so the total is about USD 7,900. Real rates differ widely between banks and applicants; ask your bank for its tariff. Try your own assumptions in the LC cost calculator — it was built for documentary credits, but the commission maths is similar.
Ways to reduce cost
For documentary credit costs, see letter of credit costs. For structure, see how an SBLC works and SBLC vs letter of credit.
- Match the amount to the real exposure and include a reduction clause as obligations are paid.
- Keep the term short, or use automatic annual extension with a clear final expiry.
- Compare several banks; rates for the same applicant can differ.
- Offer security that lowers the bank's risk, such as cash collateral, in exchange for a lower rate.
- Avoid repeated amendments by agreeing the wording up front.
How banks price a standby
An issuing bank treats a standby like a loan it may have to make. If the beneficiary draws, the bank pays and then claims from the applicant. So the price reflects the applicant's credit risk, the size and term of the exposure, and the security the bank holds. A well-rated company with an existing credit facility usually pays less than a small business that has to deposit cash. The bank also considers the beneficiary's country, the purpose of the standby and how easy it is to draw.
If the beneficiary asks for confirmation, a second bank adds its promise and charges its own commission, priced on the issuing bank and its country. That charge is often agreed to be for the beneficiary, but the contract can say otherwise. Advising banks charge a small flat fee for authenticating the standby.
Collateral is the hidden cost. A bank may ask the applicant to block part of its credit line, or to deposit cash equal to some or all of the standby amount. That money is unavailable for the business for the whole term, so its opportunity cost can exceed the commission. When comparing offers, compare the commission and the collateral together.
Questions
Who pays the SBLC commission?
Usually the applicant, because the standby supports its obligation. Confirmation and advising fees are often for the beneficiary. The contract can allocate them differently, so state it there and in the standby text.
Is the commission refunded if the standby is cancelled early?
Usually not for periods already started. Banks often charge per started quarter, so ending a standby early saves only future periods. Check the bank tariff and facility letter.
Why do some offers quote very low or very high SBLC prices?
Offers to 'lease' or sell SBLCs for a fee are a common fraud. Genuine standbys are issued by the applicant's own bank on the applicant's credit.
Is an SBLC cheaper than a documentary LC?
Often per year of trade, because there is no document checking per shipment. But the commission runs for the whole term, and banks may require collateral.
Sources
- ICC — ISP98, International Standby Practices
- ICC — UCP 600, Uniform Customs and Practice for Documentary Credits
- ICC Academy — trade finance learning
- US International Trade Administration — Letters of Credit
General guidance, not legal advice. Rules are explained in our own words; read the official ICC and Swift texts for exact wording. Your bank examines documents independently.
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