2/3/2018 Difference between LC and SBLC | LC vs SBLC

Home Citation Disclaimer / Privacy Contact We are hiring!

Difference Between | Descriptive Analysis and Comparisons

Search

Difference between LC and SBLC Popular Tags

Tweet
Right
Key difference: The ‘Letter of Credit’ and the ‘StandBy Letter of Silicon
Credit’ are two legal bank documents that are used by international Wing
traders. Both these letters are used to ensure the financial safety
between the supplier and their buyers. And, SBLC is a type of LC Father
that is used when there is a contingent upon the performance of X-mas
Christmas
the buyer and this letter is available with the seller to prove the
buyer’s non-performance during the sale.
Illusion Shoes
LC and SLBC are the
two financial Iron Velocity
instruments that are
meant to safeguard the Bull Games & Gear
financial interests of
the international
traders i.e. buyers and
sellers. It simply
means that both these
terms are widely useful
while making
transaction between
the two trading parties.
These help in giving financial security to both the parties. Also,
these contracts are produced in good faith and in both the cases
the fund gets mobilized.

During a transaction, the buyer wants an assurance of receiving

his product or merchandise on time, and the seller wants his
security of being paid on time at the completion of the job. Here, a

http://www.differencebetween.info/difference-between-lc-and-sblc 1/8
2/3/2018 Difference between LC and SBLC | LC vs SBLC

letter of credit is issued, for it is an assurance or a type of

Newly Added Differences
guarantee that the seller will receive his correct payments in time
by the clients. The LC solves both the issues by bringing in the
Born vs Borne
buyer's and seller's banks into the transaction.
Cheque vs Check
The issuing bank of the buyer, then, opens a LC in the favor of the Ambience vs Ambiance
seller and states that seller will be paid and that he or she will not Analyse vs Analyze
suffer any damages or losses because of the non-payment of the Till vs Until
buyer. Though, the money transfer to the seller will only be initiated Journal vs Ledger
after all the conditions or documents of the contract are completed. Skill vs Ability
However, the bank also safeguards the interest of the buyer by not Knowledge vs Skill
paying the supplier until it receives a confirmation from the supplier Top 10 Best Free Android
that the goods have been shipped. Games
Pachisi vs Ludo vs Parcheesi

Most Popular Differences

Management vs Administration
Android vs Windows Phone
Yoghurt vs Curd
Data vs Information
Taekwondo vs Karate
SUV vs MUV vs XUV
Tablet vs Smartphone
Listening vs Hearing
Based on this, there are two types of LCs being issued, they are:
Random Pick
Documentary Letter of Credit (DLC) and
Stand By Letter of Credit (SBLC) Formal vs Informal

Now, the DLC depends on the performance by the supplier, Punjabi vs Sikh

whereas SBLC depends on the on the non-performance or default Overloading vs Overriding in

on the part of the buyer. Java
A4 vs A6 Paper Size
A SBLC works on the same principle as a documentary letter of Loose vs Lose
credit but with different objectives and required documents. The Nokia Lumia 928 vs LG
essence of SBLC is that the issuing bank will perform in the case Optimus F7
of non performance or default by the buyer.
Atheist vs Agnostic
Diode vs Resistor

http://www.differencebetween.info/difference-between-lc-and-sblc 2/8
2/3/2018 Difference between LC and SBLC | LC vs SBLC

The purpose of this

letter is to establish a
bank guarantee for
the deal or
transaction with a
third party. For
Most Commented
example, if an
Android vs Windows Phone
individual wishes to
Management vs Administration
take a loan, but does
Tablet vs Smartphone
not have a sufficient
credit standing, the bank may then ask for a guarantee from Data vs Information

another party (third party), and this is done in the form of a standby Indian Culture vs Western
letter of credit that is issued by another bank. However, the said Culture
individual would then have to produce certain documents or Joint Family vs Nuclear Family
evidence to support the non-performance of the buyer to obtain the Yoghurt vs Curd
payment through the SBLC. The bank is obligated to make MPhil vs Ph.D.
payment if the documents presented comply with the terms of
contract. Though, the SBLC are considered very versatile and can
be used with modifications to suit the interests and requirements of
the buyers and sellers.

Comparison between LC and SBLC:

LC SBLC

It is termed as
Abbreviation
‘Letter of Credit’.
It is termed as
‘Stand By Letter of
Credit’.

Definition It is defined as an In case of a

assurance or a default, it is
type of guarantee defined as an
that the seller will assurance or a
receive his correct type of guarantee
payments in time that the seller will
by the clients. receive his correct
payments by the
bank.
http://www.differencebetween.info/difference-between-lc-and-sblc 3/8
2/3/2018 Difference between LC and SBLC | LC vs SBLC

It is the primary It serves as a

Mode of payment secondary
transaction mechanism for a payment
transaction. mechanism.

It is used as a
backup method to
It is an instrument
It is pay the financial
of payment.
credentials of the
benefactor.

The expiration The expiration date

date of an LC is of an SBLC is
Expiration date
about one to three about one year or
months. so.

Image Courtesy: scpbank.com, hsbc.co.om

Tweet

http://www.differencebetween.info/difference-between-lc-and-sblc 4/8
2/3/2018 Difference between LC and SBLC | LC vs SBLC

Add new comment

Comments
Can we issue LC against SBLC if there is merchant trading
Sandip
Thu, 09/21/2017 - 10:09

reply

Can a Bank deny payment to a seller under SBLC if the buyer

intentionally does not pay the seller by TT because the goods
received are not as described in the contract? In other words can an
SBLC payment be conditional upon seller performing under the
contract?
Dave
Thu, 09/14/2017 - 01:26

reply

Can a shipment be returned by the buyer under DLC without

accepting at port, thus jeopardizing the payment?
Sagar
Fri, 07/28/2017 - 01:35

reply

http://www.differencebetween.info/difference-between-lc-and-sblc 5/8
2/3/2018 Difference between LC and SBLC | LC vs SBLC

I am prepari g for the CDCS exam and this helps alot. Thanks.
Sharoug
Fri, 07/21/2017 - 19:23

reply

I appreciate this note it really helped my understanding of the

financial instruments.
Victor Akpan
Tue, 07/11/2017 - 15:12

reply

I think this is very useful and I an so glad as it will help my

international trade.
Shalom
Thu, 02/23/2017 - 01:04

reply

Many thanks it clear just like crystal, i have one more question (Can
we use SBLC as primary payment method if agree by both parties ?
and can the bank liquefied it directly to the client ? and if yes what is
the interest rate ?
Albahadili
Tue, 01/03/2017 - 18:29

reply

Such a great work . It has clarified a lot for our business .Thank you
soooooooooo Much !!!
AL
Sun, 02/28/2016 - 10:14

reply

This was quite apt!...Thanks and keep up the good work.

Jerome O.
http://www.differencebetween.info/difference-between-lc-and-sblc 6/8
2/3/2018 Difference between LC and SBLC | LC vs SBLC
Thu, 02/11/2016 - 12:48

reply

i visit this site very often and i must say that the articles are very
precisely explained in a concise manner....soo many things to read
and learn...great work..

Mona Patil
Thu, 04/24/2014 - 14:43

reply

1 2 next › last »
Add new comment
Your name

Comment *

Save

http://www.differencebetween.info/difference-between-lc-and-sblc 7/8
2/3/2018 Difference between LC and SBLC | LC vs SBLC

  

Copyright © 2018, Difference Between | Descriptive Analysis and Comparisons

http://www.differencebetween.info/difference-between-lc-and-sblc 8/8