What is a standby letter of credit?-Standby letter of credit

A standby letter of credit is a guarantee of payment (various from a Docudrama L/C, which is an instrument of repayment). Made use of to guarantee the efficiency/ compliance of one of the celebrations to a business contract.
A standby letter of credit, abbreviated as SBLC, refers to a lawful file where a financial institution ensures the payment of a particular quantity of money to a vendor if the customer defaults on the arrangement. In such an instance, the SBLC makes certain the required repayments are made to the vendor after fulfillment of the called for responsibilities.