Standby Credit

Standby Credit

Standby Credit serves as a backup guarantee that payment will be made if the primary party defaults. It functions similarly to a Standby Letter of Credit (SBLC).

Financial Institutions provide this form of credit. They ensure payments for projects, loans, or lease agreements. Standby Credit mitigates risk for loan providers. It remains unused unless there’s a default.

Types include Performance Standby Credit and Financial Standby Credit. Performance Standby Credit ensures contractual obligations are met in construction, service contracts, and other projects. Financial Standby Credit guarantees repayment of loans, leases, and other financial commitments.

In international trade, Standby Credit supports transactions. It offers security in cross-border deals. Companies rely on it to secure project financing.

The Uniform Customs and Practice for Documentary Credits (UCP 600) and International Standby Practices (ISP98) govern Standby Credit. These guidelines standardize procedures and practices.