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Re: [infoguys-list] I have a question.....

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  • Bob Hrodey
    ... A Standby Letter of Credit is revocable. One of the definitions is of standby letter of credit is a stipulation that states a letter of credit will be
    Message 1 of 3 , Jan 13, 2006
      on 1/13/2006 8:50 AM Ricky Gurley said the following:

      > To all,
      >
      > I was reading an article in the newspaper the other night about
      > a fraud case here in Columbia, MO. In this article the term "Standby
      > Letter of Credit" was mentioned. I asked an associate of mine (the
      > only person I actually go to; if I have a questions about anything
      > that pertains to fraud cases and such), my associate was kind enough
      > to explain to me what was meant by a "Standby Letter of Credit". The
      > explanation sounded to me like what I have heard used to explain a
      > simple Letter of Credit from a person's bank.
      >
      > Is there a difference between a "Standby Letter of Credit" and
      > a "Letter of Credit"? If so, would someone please be kind enough to
      > explain it to me?


      A "Standby Letter of Credit" is revocable. One of the definitions is of
      standby letter of credit is "a stipulation that states a letter of
      credit will be called back if the payer defaults."

      A "Standing Letter of Credit" is preferable in that, typically, it is
      irrevocable.

      Do a Google search on both terms and you'll see enough examples to get a
      feel for what they mean.

      Don't, however, neglect to consider that the newspaper reporter screwed
      up and MEANT to say "Standing Letter of Credit" - world of difference
      and it's not like they (the media) never make a mistrake<g>




      --
      Enjoy,

      Bob
      ________________________________________________________________
      Hrodey & Associates Established 1977
      Post Office Box 366 Member of NALI, ASIS, FBINAA, NAPPS
      Woodstock, IL 60098-0366 NCISS, Assoc Det of IL & P.A.W.L.I.
      Licensed in IL & WI (815) 337-4636 Voice 337-4638 Fax
      email: inquiry@... or rth@...
      Illinois License 115-000783 Wisconsin 8045-063
    • Bob Hrodey
      ... Here s a better definition: *Standby Letter of Credit* The standby letter of credit serves a different function than the commercial letter of credit. The
      Message 2 of 3 , Jan 13, 2006
        on 1/13/2006 8:50 AM Ricky Gurley said the following:

        > To all,
        >
        > I was reading an article in the newspaper the other night about
        > a fraud case here in Columbia, MO. In this article the term "Standby
        > Letter of Credit" was mentioned. I asked an associate of mine (the
        > only person I actually go to; if I have a questions about anything
        > that pertains to fraud cases and such), my associate was kind enough
        > to explain to me what was meant by a "Standby Letter of Credit". The
        > explanation sounded to me like what I have heard used to explain a
        > simple Letter of Credit from a person's bank.
        >
        > Is there a difference between a "Standby Letter of Credit" and
        > a "Letter of Credit"? If so, would someone please be kind enough to
        > explain it to me?
        >
        >


        Here's a better definition:

        *Standby Letter of Credit*
        The standby letter of credit serves a different function than the
        commercial letter of credit. The commercial letter of credit is the
        primary payment mechanism for a transaction. The standby letter of
        credit serves as a secondary payment mechanism. A bank will issue a
        standby letter of credit on behalf of a customer to provide assurances
        of his ability to perform under the terms of a contract between the
        beneficiary. The parties involved with the transaction do not expect
        that the letter of credit will ever be drawn upon.

        The standby letter of credit assures the beneficiary of the performance
        of the customer's obligation. The beneficiary is able to draw under the
        credit by presenting a draft, copies of invoices, with evidence that the
        customer has not performed its obligation. The bank is obligated to make
        payment if the documents presented comply with the terms of the letter
        of credit.

        Standby letters of credit are issued by banks to stand behind monetary
        obligations, to insure the refund of advance payment, to support
        performance and bid obligations, and to insure the completion of a sales
        contract. The credit has an expiration date.

        The standby letter of credit is often used to guarantee performance or
        to strengthen the credit worthiness of a customer. In the above example,
        the letter of credit is issued by the bank and held by the supplier. The
        customer is provided open account terms. If payments are made in
        accordance with the suppliers' terms, the letter of credit would not be
        drawn on. The seller pursues the customer for payment directly. If the
        customer is unable to pay, the seller presents a draft and copies of
        invoices to the bank for payment.

        The domestic standby letter of credit is governed by the Uniform
        Commercial Code. Under these provisions, the bank is given until the
        close of the third banking day after receipt of the documents to honor
        the draft.

        More terms defined at:

        http://www.crfonline.org/orc/cro/cro-9-1.html



        --
        Enjoy,

        Bob
        ________________________________________________________________
        Hrodey & Associates Established 1977
        Post Office Box 366 Member of NALI, ASIS, FBINAA, NAPPS
        Woodstock, IL 60098-0366 NCISS, Assoc Det of IL & P.A.W.L.I.
        Licensed in IL & WI (815) 337-4636 Voice 337-4638 Fax
        email: inquiry@... or rth@...
        Illinois License 115-000783 Wisconsin 8045-063
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