An independent undertaking to pay on a compliant demand that cites default under the underlying contract. Often governed by URDG 758 if stated.
A letter of credit used as a backstop. If the applicant fails to pay or perform, the beneficiary can draw by presenting the documents stated. Typically governed by ISP98, sometimes UCP600 by choice.
A secondary promise that depends on the underlying debt. Not on-demand. Less common in international trade because it invites disputes about the base contract.
Standbys are standard for “guarantee” needs due to historical banking rules. UCC Article 5 backs LC autonomy with a narrow fraud exception. ISP98 is common.
Courts generally uphold on-demand autonomy with limited injunctions. Both SBLCs and demand guarantees are used. URDG 758 and ISP98 are accepted.
Demand guarantees under URDG 758 are familiar. For cross-border trades, SBLCs under ISP98 are widely accepted by international banks.
| Aspect | SBLC (usually ISP98) | Demand guarantee (usually URDG 758) |
|---|---|---|
| Nature | Letter of credit used as a backstop; documentary draw | Independent guarantee; documentary draw with simple demand |
| Presentation | Demand plus any stated documents (e.g., statement of default) | Demand plus any stated documents (URDG keeps it simple) |
| Extend-or-pay | Common and well addressed in ISP98 | Possible but less standardized than in ISP98 |
| Bank network | Runs through LC infrastructure, advising, confirmation, discounting | Direct or indirect with counter-guarantees; also widely accepted |
| When preferred | US counterparties, trade and leasing, cross-border projects needing confirmation | Construction bid/performance/warranty in civil-law markets; government formats |
In some countries the beneficiary requires a local bank to issue the instrument. The applicant’s bank then issues a counter-guarantee to the local bank. URDG 758 sets clear rules for these chains. SBLCs can achieve the same through advising and confirmation, often with simpler processing.
Banks price on applicant strength, collateral or cash security, issuer name, country risk, tenor, and purpose. Many require security or reimbursement agreements.
Annual commission on the face amount, plus issuance, amendment, confirmation, and advising fees. Legal, courier, and SWIFT costs are common.
KYC, financials, underlying contract, preferred wording, and any local format. For construction, expect bid/performance/advance-payment templates.
Payment standby in lieu of prepayment or open terms.
Bid, performance, and advance-payment security.
Tenant security in place of cash deposits, completion undertakings.
Standby for rentals or return conditions.
They serve the same purpose and behave similarly as independent undertakings. SBLCs are letters of credit governed mostly by ISP98. Demand guarantees are governed by URDG 758 if stated. Both pay against documents, not arguments about the base contract.
If the beneficiary or the law requires a “guarantee” format or a local bank chain with counter-guarantees, URDG 758 fits well. If you want letter-of-credit operations, extend-or-pay clarity, and confirmation options, ISP98 on an SBLC is often cleaner.
Yes. A strong confirming bank can add its own promise to pay, improving payout certainty and enabling discounting against the standby when terms allow.
Yes. The rule set governs practice, but governing law and jurisdiction control issues beyond the rules. Choose a seat with predictable treatment of independent undertakings.
Share the purpose, amount, expiry, preferred rule set, draft wording, and your KYC and financials. We will confirm eligibility and pricing bands.
Request Indicative TermsFinancely acts as advisor and arranger on a best efforts basis. We are not a bank. All transactions are subject to KYC and AML, sanctions screening, credit approval, legal documentation, and available bank capacity. Nothing here is legal advice, a commitment to lend, or an offer of securities. Terms vary by bank names, jurisdictions, and documentary quality.
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Advisory services are reserved for post-revenue companies that recognize the time and resources required for professional underwriting.
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Letters of Credit, Standby LCs, Confirmations, Receivables Finance, and Inventory Lines with control.
Funding arranged for trade flows with instruments sized to your cycle and aligned to delivery and settlement.
Move forward to secure working capital and keep goods moving. Submit the RFQ to start underwriting for funding.
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Advance the file to termable status. Submit the RFQ so we can underwrite and secure funding.
Debt and Preferred solutions anchored on cash flow, Quality of Earnings, and clear closing mechanics.
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Get financed on workable terms for closing. Submit the RFQ to start underwriting.
Acquisition, development, bridge, and refinance with lender-ready packs and third-party reports managed.
Funding calibrated to DSCR, leverage, and tenancy with terms designed to close.
Move to a financeable package. Submit the RFQ to initiate underwriting for funding.
KYC and Source of Funds required. Engagements are best-efforts and subject to underwriting. Preference for operating companies with meaningful revenue. See our FAQ and Procedure.
Financely Inc. (“Financely”) provides corporate-finance advice and is wholly owned by Aurora Bay Trust, a trust formed under Bahamian law, together with its authorized affiliates. Depending on deal structure, jurisdiction, and local rules, engagements may be carried out through Financely Group LLC, a non-deposit-taking, non-banking financial company; Ashford Capital Advisory LLC; or another related entity.
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