How Bank Guarantee Is Better Than Standby Letter Of Credit

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How Bank Guarantee Is Better Than Standby Letter
Of Credit
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• A standby letter of credit and bank guarantee is
  very similar and mostly used while making an
  international transaction. But they also used as
  prove to show your access to cash on a short
  notice for purchases, sales and transactions. But
  a bank guarantee provides you more protection in
  case of short notice rather than SBLC.
• Lets discuss how Bank Guarantee is better than
  SBLC
• Bank risks

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• Even though in both cases of SBLC Bank
  Guarantee, a bank need to face certain risk but
  the amount of risk decreases with bank guarantee
  as it offer more protection because the bank will
  process the request depending on your credit
  standing.
• Protection difference
• Main purposes of both documents are same but
  between them a legal difference can be seen. A
  SBLC only protects the seller, where a bank
  guarantee protects both seller and the buyer.
• Example If you are a buyer then a bank
  guarantee will protect you in cases of not
  receiving the purchase item or if the item is
  damaged in the time you receive.

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• But if case of SBLC letter of credit  you will
  get your item but there is no guarantee whether
  the item will receive on time or not.
• Performance difference
• In case of international sales, the most
  preferred way chooses by the sellers is Bank
  Guarantee.
• And the reason for this, in case of Bank
  Guarantee a seller gain a fast, guaranteed
  payment, including currency conversion, if it is
  needed, direct to their bank account without
  facing any problem. But this is not the same with
  a Standby Letter of Credit.

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• Payment Guarantee
• If you are a seller then to ensure the payment
  for the items you sold, you can call in bank
  guarantee.
• When you buy something and do not make a timely
  payment, then the seller can contact the bank and
  ask to act on the bank guarantee.

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