Difference Between a Documentary Letter of Credit and a Standby Letter of Credit

Documentary Letter of Credit is an international trading mechanism wherein an issuing bank, on behalf of the importer or buyer, guarantees to make payment to the seller when all the goods are delivered properly and with required documentation, having precise information. The documents should strictly comply with what is mentioned in the letter of credit and “substantial compliance” is not enough.

The Documentary Letter of Credit Provider (issuing bank) such as SUISSE BANK PLC guarantees payment depending on the performance and conformity by the supplier. Simply put, it is a primary payment method wherein the seller’s interest is well-protected through guaranteed payment. However, to claim the payment, the exporter has to fulfil the conditions and present necessary documents as specified in the letter of credit.