Standby Letter of Credit

There are various ways through which a financial institution can issue credit to its customers. A Standby Letter of Credit is offered by the issuing bank and states that it is liable to pay the respective amount in the case the customer fails to make the payment. This is basically a guarantee to minimise the risk for the seller.

In the first paragraph, mention the amount of credit and the date on which the customer applied for the Letter of Credit. Also inform the customer regarding the decision. In the rest of the body, mention the mention terms and conditions of the contract and warn the customer against the consequences of a failure to make payments by the due date.

Instructions

  • 1

    Sample Standby Letter of Credit


    Martin King
    Stella Exporters Limited
    May 24, 2012

    Subject: Standby Letter of Credit

    To Whom It May Concern

    This is in reference to the credit amount of $7,500 you applied for at the Gold National Bank on April 20, 2012. You will be pleased to know that our bank management has decided to accept your application and have decided to issue a Standby Letter of Credit in this regard for the mentioned amount.

    The committee had thoroughly processed your request and have come to a decision in favour of your firm considering your credit history with our bank. We need to make it clear that the issued Letter of Credit is secured and authenticated in the court of law.

    Gold National Bank also wants to bring it to your knowledge that all parties will have to abide by the terms and conditions of the contract and a failure to make timely payments could results in legal action against your firm.

    Thanking You

    Yours sincerely,
    Mark Samuel
    Branch Manager
    Saint Avenue 2455 NY
    Gold National Bank

  • 2

    Template of Standby Letter of Credit


    [Recipient’s Name]
    [Recipient’s Company]
    [Date]

    Subject: Standby Letter of Credit

    To Whom It May Concern

    I am writing this in reference to the application you made for a credit amount of ................. on ................. It is stated that ................. has thoroughly assessed your application and have made a decision in favour of your company. You will be pleased to know that the credit amount has been approved and we will be issuing a Standby Letter of Credit in this regard.

    We expect to receive payments by the due date and a failure to do so could result in further consequences.

    We sincerely hope to maintain friendly business relations with your company.

    Yours sincerely,
    [Sender’s Name]
    [Sender’s Title]
    [Sender’s Company]

Leave a Reply

Your email address will not be published. Required fields are marked *


four + = 5