The central question of every new international operation is the same: why would I ship cargo to someone I have never met — or pay in advance someone who has never delivered to me? Letters of credit exist to take that question off the table.
DLC — the documentary letter of credit
Issued by the buyer's bank (via SWIFT MT700), the DLC guarantees payment against presentation of the agreed documents: bill of lading, inspection certificate, invoice, packing list. The seller ships knowing payment is secured by a bank, not by a promise.
SBLC — the standby guarantee
The Standby Letter of Credit (via MT760) works as a safety net: it is only drawn if a party breaches the contract. While the DLC is the payment mechanism, the SBLC is the guarantee that payment will happen.
What changes in practice
- Credit risk moves from the counterparty to Tier 1 banks.
- The required documents force the operation to be verifiable — documented inspection, shipment and insurance.
- Recurring operations gain predictability: the same instrument repeats with every shipment.
A well-structured financial instrument is not bureaucracy: it is what lets two strangers operate like long-standing partners.
Where problems happen
Documentary discrepancy is the number one cause of delay: a weight mismatch between invoice and bill of lading is enough to block release. That is why documentation must be born aligned — contract, inspection and instrument speaking the same language.