Everything you need to know about Insurance standby
A Standby Letter of Credit is written obligations issued by a bank on behalf of a buyer to pay a certain amount of money to the seller during a business transaction. It is essential to remember that insurance standby letters of credit are applicable when the issuing bank is unsure regarding the payment. In this article, we will discuss standby letters of credit. So let's start. What is the purpose of the standby letter of credit? The standby letters fulfill the same goal as a bank guarantee: it can be paid upon the first demand without any objection based on the underlying transaction between buyer and seller. It is totally upon the seller who can decide whether to consider a standby letter of credit. What are the types of standby letters of credit? (1) Performance Standby. This instrument helps to execute an obligation to perform to pay money thereby including the purpose of managing the losses that arise because of the defaulter in completion of underlying task. (2) Advance Pay