Definition:

A guarantee of payment (different from a Documentary L/C , which is an instrument of payment). Used to guarantee the performance / compliance of one of the parties to a commercial contract. Typically, Citibank^® is committed to pay to the beneficiary only if the commercial agreement covered by the Stand-By is not observed by the applicant.There are also operations in which the Stand-by Letter of Credit functions as a payment mechanism.

Advantages:

	It can be used to cover different types of contracts
	Can guarantee the exporter’s performance in some transactions or only in one specific transaction (such as capital goods’ import with technical specifications, projects on a turn-key basis, etc.)
	Could cover the compliance of the importer in open account for a number of transactions.
	Is usually required in international biddings.

Costs:

	Issuing fee and amendments for term and/or amount: a percentage of the total amount for the total term; generally this fee is expressed on a per annum basis.
	Other costs: amendment, cable, etc.

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