Standby Letter of Credit Wording Templates

Strong standby wording turns a promise into predictable liquidity. Sloppy wording turns the same instrument into a fight. This guide gives you practical templates, the reasoning behind each clause, and a clear take on which ruleset to select. We cover ISP98, UCP600, and URDG 758 in plain language. You will see how to draft payment standbys, performance standbys, advance payment guarantees, bid bonds, and retention guarantees. The aim is a clean draw if the facts are on your side, plus fair protection if you are the applicant. No em dashes are used in this document.

ISP98 vs UCP600 vs URDG 758

A standby letter of credit is a bank undertaking to pay against a complying presentation. The rules you choose drive how banks examine documents and how disputes are handled. Pick the wrong ruleset and you create friction for everyone.

ISP98 in short

• Built for standbys. Clear on default evidence, statements of non payment or non performance, and partial drawings.
• Flexible on what counts as a complying demand when the evidence list is drafted well.
• Best default for most SBLCs in trade, projects, and services.

UCP600 in short

• Designed for documentary credits. Works for standbys only if the wording closes gaps.
• Strict on document examination timelines and banking practice. Good when presentation is classic trade paperwork.
• Use when the beneficiary wants the same bank handling as a DLC and everyone is used to UCP mechanics.

URDG 758 in short

• For demand guarantees. Common in EPC, construction, and public procurement.
• Clean framework for independent guarantees. Helps when the counterparty expects a guarantee form rather than an SBLC.
• Use for performance guarantees, advance payment guarantees, and bid bonds where guarantee forms are the norm.

Quick rule of thumb. If the instrument is a safety net for default, pick ISP98. If it mirrors a documentary credit style presentation for shipment, UCP600 can work. If the buyer or contracting authority requires a demand guarantee, URDG 758 is the natural fit.

The Eight Clauses You Cannot Skip

1. Undertaking language. State that the issuing bank irrevocably undertakes to honor against a complying presentation.
2. Amount and currency. Numerical and words. Clarify if partial drawings are allowed.
3. Expiry. Fixed calendar date or evergreen with automatic extension wording. Include place of expiry.
4. Governing rules. Reference ISP98, UCP600, or URDG 758. Add governing law only if required by the deal.
5. Beneficiary. Legal name, address, and any registration details needed for compliance.
6. Presentation place and method. Physical address, email for e-presentation if agreed, and business days and hours.
7. Documents required. Keep it short. A signed demand and a statement that default occurred or payment was not received are usually enough for a standby.
8. Charges. Who pays bank fees on issue, confirmation, amendment, and payment.

SBLC Wording Templates by Use Case

These templates are starting points. Match them to your contract, jurisdiction, and the bank form. Keep the evidence list objective. Avoid language that requires a court ruling or subjective judgment. Replace placeholders in brackets with your details.

Template 1 — Payment Standby (ISP98)

IRREVOCABLE STANDBY LETTER OF CREDIT
Issuing Bank: [Bank Name and Address]
Applicant: [Applicant Legal Name and Address]
Beneficiary: [Beneficiary Legal Name and Address]
Standby No.: [Reference]
Amount: [Currency and Figure] ([Amount in Words])
Expiry: [Date] at the counters of Issuing Bank in [City, Country]
Governing Rules: This standby is subject to the International Standby Practices ISP98.
We hereby issue this irrevocable standby in favor of the Beneficiary. We undertake to honor draws up to the Amount upon presentation of:
1. Beneficiary’s signed demand stating that the Applicant has failed to pay amounts due under [Contract/Invoice No.] dated [Date].
2. A copy of the unpaid invoice(s) or a statement of account showing the amount due and the due date.
Partial drawings are permitted. Multiple presentations are permitted.
Presentation may be made by courier or by authenticated electronic transmission to [email or platform details if agreed]. 
This standby expires on the Expiry date unless previously cancelled by the Beneficiary’s written release presented to the Issuing Bank.
All bank charges outside the Issuing Bank are for account of the Beneficiary unless otherwise agreed.
[Authorized signature block of Issuing Bank]

Template 2 — Performance Standby (URDG 758 or ISP98)

PERFORMANCE STANDBY
Issuer: [Bank Name]
Applicant: [Contractor Name]
Beneficiary: [Owner/Employer Name]
No.: [Reference]
Amount: [Currency and Figure] ([Words])
Expiry: [Date] at [Place of Expiry]
Rules: This guarantee is subject to URDG 758. 
(Alternative: This standby is subject to ISP98.)
We irrevocably undertake to pay upon receipt of:
1) Beneficiary’s signed demand stating that the Applicant has failed to perform its obligations under Contract [No./Date/Project] and the nature of such failure, and
2) A copy of the notice to the Applicant describing such failure.
Partial drawings permitted. This guarantee reduces by any amount paid. 
Presentation: At [address]. Electronic presentation accepted at [email or platform] if sent before close of business at place of presentation on the Expiry date.
This guarantee is independent of the underlying contract.
[Issuer signature block]

Template 3 — Advance Payment Guarantee (URDG 758)

ADVANCE PAYMENT GUARANTEE
Guarantor: [Bank]
Applicant: [Supplier/Contractor]
Beneficiary: [Buyer/Employer]
No.: [Reference]
Amount: [Currency and Figure] ([Words])
Expiry: [Date] at [Place]
Rules: URDG 758
We irrevocably undertake to pay upon presentation of:
a) Beneficiary’s signed demand stating that the Applicant has failed to apply the advance payment in accordance with Contract [No./Date], or has failed to refund the unearned portion of the advance upon demand, and
b) Copy of the advance payment receipt or certificate confirming the amount of advance paid.
The guarantee amount reduces pro rata with certificates evidencing delivery or performance up to the amount of the advance.
Partial drawings permitted.
[Guarantor signature]

Template 4 — Bid Bond Standby (URDG 758)

BID BOND GUARANTEE
Guarantor: [Bank]
Applicant: [Bidder]
Beneficiary: [Procuring Entity]
No.: [Reference]
Amount: [Currency and Figure] ([Words])
Expiry: [Date] at [Place]
Rules: URDG 758
We irrevocably undertake to pay upon presentation of Beneficiary’s demand stating that:
i) the Applicant has withdrawn its bid during the bid validity period, or
ii) the Applicant, having been awarded the contract, has failed to sign the contract or provide the required performance security.
Partial drawings not permitted.
[Guarantor signature]

Template 5 — Retention Money Guarantee (URDG 758)

RETENTION MONEY GUARANTEE
Guarantor: [Bank]
Applicant: [Contractor]
Beneficiary: [Employer]
No.: [Reference]
Amount: [Currency and Figure] ([Words])
Expiry: [Date] at [Place]
Rules: URDG 758
We irrevocably undertake to pay upon Beneficiary’s demand stating that the Applicant has failed to remedy defects or fulfill obligations during the defects liability period under Contract [No./Date].
This guarantee is payable on first demand within the amount and before Expiry.
[Guarantor signature]

Common Options and Riders

1) Automatic extension (evergreen)

Unless we notify the Beneficiary in writing at least [60] days before the current Expiry date that we elect not to extend, this standby shall be automatically extended for successive periods of [12] months, but in no event beyond [Final Long Stop Date if any].

2) Transferable standby

This standby is transferable one time only upon Beneficiary’s request and payment of transfer fees, subject to our acceptance of the transferee’s details. Partial transfer permitted if partial drawings are permitted.

3) Confirmation rider

At Beneficiary’s request we will seek to add confirmation from [Confirming Bank]. Confirming Bank’s charges are for Beneficiary’s account unless otherwise agreed.

4) e-Presentation

Presentation may be made electronically by sending documents in PDF to [secure address] and is deemed received when available for examination at the place of presentation during banking hours.

5) Charges clause

Issuing Bank charges are for the Applicant. All other bank charges, including those of any Confirming Bank or advising bank, are for the Beneficiary unless otherwise stated.

Frequent Wording Mistakes that Kill Collections

• Overstuffed evidence lists. Requiring delivery photos, third party affidavits, or board resolutions invites refusal. Keep it tight and objective.
• Missing place of expiry. Banks examine at the place of presentation. If the place is not clear you get timing fights.
• Demand text without default basis. Say what breach triggers payment. Non payment, failure to perform, or failure to refund an advance are simple and clear bases.
• Jurisdiction and law in conflict with rules. If law and rules point in different directions you get delay. Stay consistent and only add governing law if the counterparties insist.
• Forbidding partial drawings when the exposure is staged. Staged projects need staged protection. Allow partials with a clear reduction logic.
• Linking to the underlying contract for interpretation. Keep the standby independent. Reference the contract only to identify the transaction.
• Ambiguous electronic presentation wording. State the accepted channels, file types, and business hours at the place of presentation.

If You Must Use UCP600 for a Standby

• Say that only the documents listed will be examined. Avoid open ended references to shipment or insurance unless you intend to present them.
• Align the presentation period with the invoice due date or default date. Bank examiners will focus on timelines.
• State that a statement of default or non payment is acceptable as the sole required document besides the demand.
• Confirm that partial drawings are allowed if the exposure is not a one time event.

Issuer Playbook to Reduce Risk without Blocking Payment

• Ask for objective triggers only. Non payment, failure to perform, failure to refund advances, or failure to remedy defects are all objective when defined.
• Use ISP98 for standbys. Your teams will process faster since the rules match the instrument.
• Prefer evergreen with a final long stop date if the contract is long. Avoid cliff expiries that force last minute rushes.
• Confirm who pays which bank fees. Misunderstandings here sour the closing.
• Record sample signatures for the beneficiary’s demand signatory where local practice expects it.

Beneficiary Playbook to Improve Collectability

• Keep the evidence list short. A signed demand with a clear statement of default is usually enough.
• Ask for acceptance of electronic presentation. Courier delays create avoidable refusals.
• Push for confirmation if the issuer rating or jurisdiction is weak. Price it up front so there are no surprises.
• Check the place and hour of presentation. Final day timing is a real issue in practice.
• Store a pre filled demand template so you are ready to present if needed.

FAQ

This article provides general drafting guidance only. Final wording must be approved by the issuing bank and aligned with local law, sanctions rules, and internal policies. Financely structures and coordinates SBLC issuance through regulated partners. We do not issue letters of credit. All instruments are subject to KYC, AML, and bank approvals.