standby letter of credit

Definition of "standby letter of credit"
  1. A document issued by a bank that guarantees payment to a third party in the event that the bank's customer fails to meet their obligations, provided that the third party can provide evidence of this non-compliance
How to use "standby letter of credit" in a sentence
  1. To ensure the supplier would be paid if the buyer defaulted, the buyer secured a standby letter of credit from the bank.
  2. If the contract is breached, the company can claim the amount from the standby letter of credit, providing evidence of the breach.
  3. Though hoping to never use it, the company acquired a standby letter of credit from the bank to assure their vendors they would receive payment even in case of default.

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