Standby letter of credit

A standby documentary credit is an undertaking activated only in the event that the buyer defaults on payment. It, therefore, allows the seller to enforce a claim. A standby documentary credit acts as a bank guarantee. Standby letters of credit are usually subject to Uniform Customs and Practice for Documentary Credits (UCP), ICC Publication No. 600 but may be subject to ISP98 rules.

Contrary to a documentary credit, documents must be presented to the bank only when the buyer has failed to fulfill his obligations.