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Stand By Letters of Credit (SBLC's) 

Stand By Letters of Credit (SBLC's) - Cash them in for real dollars.
Note: This also applies to Letter of Credit (LC); Irrevocable Letter of Credit (ILC); and Pay Orders

Value conversion depends on many factors, some fixed, some floating such as:

  • Type of Letter of Credit varies and includes (SBLC, ILC, LC, Pay Order, etc.)

  • It is Usually viewed as a SBLC is the Better Bank Instrument

  • SBLCs are issued on a Bank-to-Bank Basis only

  • The Issuing Bank Rating as well as location (branch) of Bank

  • Who is issuing the instrument - individual, company, government, etc.

  • Instrument Must Be in US Dollars only

  • Bank Policy

  • Market Conditions

  • Client Anticipation of Return

  • Place Transaction Occurs

What is done with 'Cash' after conversion - this is becoming a paramount issue with banks converting the instrument, the preferred and acceptable method is to deposit a portion of the redeemed funds with the honoring bank, usually not less than 20% for a period of not less than six (6) months.


  • These types of Bank Instruments can be issued to individuals, corporations, trust, pension funds, endowments, non profit organizations, or to any payable entity.

  • Individuals who hold such an instrument may have problems with 3rd party transactions or banks.

  • LC, ILC, or SBLC are often times issued for the sale and purchase of tangible assets.

  • It is often easier to raise a 'Credit Line' than convert the instrument to CASH!

  • Fluctuating World Market Conditions set the pace and determine the trading value, if any.

  • Usually most every instrument can be converted, however, some are just Not desirable Trading Instruments on the current World Market.

  • Certain Required "Documentation' is needed for this type of transaction.

Recommended further reading:
ICC endorsement of the UNCITRAL Convention on Independent Guarantees and Stand-by Letters of Credit
The mechanics of prime bank SLCS and guarantees
Letters of Credit (LC, ILC & Pay Order)