#documentagainstacceptance

[merchantfinance]

A letter of credit is one of the best modes of payment for international trade transactions. There are different kinds of letters of credit, Standby Letters of Credit being one of them. A Standby Letter of Credit or SLOC is a legal document issued from a bank as a guarantee for payment on behalf of the buyer or importer to the seller or the exporter. In case of the failure of the payment from the importer, the bank will be answerable to the beneficiary of SLOC. The relevance of issuing a SLOC is clear from the fact that it helps in facilitating international trade between two parties from different countries with different laws and regulations. A Standby Letter of Credit can be of two kinds: a Financial SLOC assures payment for goods as per the terms mentioned in the document; a Performance SLOC is an assurance by the bank to pay for the goods in case the importer fails to do so.