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LC vs SBLC: Which one REALLY reduces my risk over 90/180 days?
Hands-on comparison, total costs, documentary risks (UCP 600/ISBP), and a 7-step decision path. Typical issuance lead-time: 5–15 business days.
⏱️ 5–15 biz days
🏦 A / BBB banks
📑 UCP 600 • ISP98Don’t post IBAN/sensitive data publicly. Send via the secure form.
🎯 Executive summary
LC (Letter of Credit)
- Reduces non-payment risk provided documents comply.
- Usance 90/180d = supplier credit; Confirmation = rated bank protection.
- Best for document-driven flows and supply chains needing BL/quality docs.
SBLC (Standby)
- Acts as a last-resort guarantee (drawing under conditions).
- Great for performance/bid/advance or project/PPP deals.
- May be monetizable depending on issuer/wording (case by case).
📦 Documents: ISBP
🚚 Incoterms®
🔐 KYC/AML📊 LC vs SBLC — Operational comparison
Criterion LC (Sight/Usance) Confirmed LC SBLC (Trade/Perf.) Primary purpose Payment subject to documents Payment + bank/country risk cover Guarantee against non-performance/payment Typical tenor At sight / 90–180d At sight / 90–180d (confirmed) Usually = contract period Seller risk Low if docs comply Very low (confirming bank) Low if wording/actionable Buyer risk Controlled via LC terms Controlled + confirmation spread Exposure if abusive call (mitigable) Total cost Issuance + advising + Confirmation spread Standby commission Monetization Possible via forfaiting/factoring Easier (strong confirmer) Case by case (issuer/wording) Lead-time 5–15 business days depending on banks/file Costs vary by bank rating, country, amount, structure, and SWIFT wording.
🧮 Simple case (180 days)
Case A — LC usance 180d
- Cost: issuance + advising + discount (if needed).
- Risk: documentary non-compliance (ISBP).
- Upside: “mechanical” payment if docs OK.
Case B — SBLC (Trade)
- Cost: standby commission (full tenor).
- Risk: wording/call mechanics.
- Upside: strong performance pressure.
Pragmatic rule: if your flows rely on transport/quality documents, LC (confirmed if needed) is often king.
If you must guarantee an obligation (performance/advance), SBLC is often more direct.⚠️ 15 costly UCP 600/ISBP mistakes
- Incoherent shipment dates vs LC
- Missing/stale original BL
- Goods description not matching LC
- Missing certificate of origin/inspection
- Insurance not aligned to Incoterm
- Amount/tolerance breaches
- Partial shipments not permitted
- Transhipment banned vs actual routing
- Docs issued after latest shipment date
- Discrepancies not cured in time
- Beneficiary/Applicant misspelled
- UCP 600 cited wrong/omitted when required
- Presenting bank not authorized
- “Soft” conditions impossible to evidence
- Missing drafts (when required)
🧭 7-step decision
- Clarify the flow (Documents vs Result guarantee)
- Pick tenor (90/120/180d) & Incoterms®
- Assess issuing bank/country rating
- Choose confirmation (yes/no)
- Draft SWIFT wording (MT700/760/799/199)
- Line up credit insurance/forfaiting if cash is needed
- Define realistic milestones & cut-offs
📝 Copy/paste request template
Role: Buyer/Seller/Developer
Subject: (e.g., 180d confirmed LC for machinery)
Amount & Currency:
Tenor: 90/120/180d
Incoterms® & Countries:
Banks shortlisted / Ratings:
Docs available: (LOI, Proforma, Contract, draft MT700/760/799/199…)
Target timing:
Constraints: (sanctions, credit insurance, etc.)Standards: KYC/AML • UCP 600 • ISP98 • ISBP • Incoterms®
LC
SBLC
Confirmation
Forfaiting
Credit Insurance
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