The Stand-by Letter of Credit is a flexible instrument used to guarantee different types of obligations in which, if the applicant fails to comply with the commitments acquired, the bank will guarantee payment. In international trade operations, the use of a Stand-by Letter of Credit or an Independent Guarantee is now commonly used as an instrument to assure compliance with obligations.
The following types of obligations may be guaranteed through Stand-by Letters of Credit:
- Commercial obligations.
- Financial obligations.
- Service obligations.
Contractual Guarantees or Bonds are operations through which banking institutions guarantee and provide backing for firms to participate in international public bidding processes for the granting of contracts for sale of goods or provision of services.
The most common types of guarantees are:
- Bid bonds.
- Advance payment bonds.
- Compliance bonds.
- Performance and/or maintenance bonds for goods or services sold or granted.
Designed for
- Private sector firms.
- Public sector firms.
Benefits
Failure to comply with any of the guarantees mentioned will automatically allow the beneficiary to collect on the guarantee from the issuing bank.
Requirements
- Presentation of a properly completed “Application for Issuance of Stand-by Letter of Credit” (Formato F20), with the application form provided by Bancomext.
- Presentation of the firm’s legal documentation required by Bancomext for proper client identification (only for the first operation).
- Compliance with credit requirements for requesting a line of credit with Bancomext for the issuance of Letters of Credit, if the amount is above 3 million US Dollars, or 100% of the operation’s value through a cash deposit (provision of funds).
- Payment of the corresponding commission.
Contact
Apply for a Letter of Credit at: cartasdecredito@bancomext.gob.mx.