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Standby Letter of Credit

The standby letter of credit is issued by banks or financial institutions. It is given to vouch on the integrity of the seller and purchaser, acting as an intermediary. It is a guarantee of payment issued by the bank on behalf of the client. The standby letter of credit is created as a sign of good faith in business transactions and it also acts as a proof of buyer’s credit quality.

Here in the sample provided below, a bank writes this letter to a financial organization regarding an individual’s standby credit application. Here the bank works as an intermediary between the two parties.

Sample Standby Letter of Credit

From

Bosnia Garments Inc.

New York

Aug 14, 2014

Beneficiary

Caring Homes

23 Maple Street

Manor District, FL 32463

James S. Smith

4205 White Oak Drive

Lee S Summit, MO 64063

Account Party

Barry Andrews

New York

Sir,

Sub: Irrevocable Standby Letter of Credit # {93874321}

 I am writing this letter on behalf of First United Bank of USA. We hereby issue our irrevocable and unconditional standby credit of Mr. Smith in favour of Caring Hoes for the amount of $100,000 which will expire on 31st July’14.

The party has notified us that with the issue of this credit letter, the obligations presented for the agreed loan agreement will get confirmed by the borrower and Caring Homes. The bank hereby confirms the loan agreement and its validity with this credit letter taken as guarantee, which will be serviced with the assets of the borrower.

The issuance of this letter is in accordance with the standard custom and practices.

Yours truly

Barry Andrews

Given Below are a few credit letter samples for a clearer Idea.

Sight Letter of Credit
A letter of credit that is payable once it is presented along with the necessary documents.

Revolving Letter of Credit
A revolving letter of credit is issued by banks or financial institutions to the clients.

Documentary Letter of Credit
Documentary letter of credit is a well-known fact that a credit facility is important, especially for the people involved in business activities.

Credit Refusal Letter
A credit refusal letter is sent from one party to another during the course of a business, so as to inform the recipient that his/her request for a credit has been denied.

Credit Reference Letter
A credit reference letter is issued by a bank or any other financial institutions.

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