As compared to letters of credit (LCs), standby letters of credit (SLCs) typically are used to cover contingencies that potentially are more severe and which may not be trade related.

Question

Quizplus · Accepted Answer

SLCs are often used as a form of financial guarantee to cover contingencies such as non-payment or non-performance on a contract. They are not necessarily tied to any specific trade transaction, unlike LCs which are primarily used to facilitate international trade.

As Compared to Letters of Credit (LCs), Standby Letters of Credit