Standby Letter of Credit (SBLC): Meaning and Uses
What a standby Letter of Credit is, how it differs from a commercial credit, and which rules apply.
Reviewed by LCCheck team (owner-approved) · 2026-10-12
Short answer
A standby Letter of Credit is a bank undertaking that pays if the applicant fails to perform — it is a backup rather than the main payment method. The beneficiary typically presents a demand stating that the applicant has defaulted. Standbys are usually subject to ISP98, though UCP 600 can apply where suitable.
| Purpose | Backup payment on default |
|---|---|
| Rules | ISP98 (or UCP 600 where applicable) |
| Typical document | Demand / statement of default |
Common uses
- Supporting open-account sales.
- Performance and advance-payment security.
- Lease and loan obligations.
Versus commercial credit
- Commercial credit: paid in normal course against shipping documents.
- Standby: drawn only if something goes wrong.
Sources
General guidance, not legal advice. Your bank examines documents independently.
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