SBLC vs DLC: Which Letter of Credit Is Right for Your Deal?
SBLC vs DLC: Which Letter of Credit Is Right for Your Deal?
Letters of credit are critical tools for cross-border trade and project finance. But not all LCs serve the same purpose. The two most common — the Standby Letter of Credit (SBLC) and the Documentary Letter of Credit (DLC) — are often confused. This post clears up the difference and helps you decide which one fits your transaction.
What Is a Documentary Letter of Credit (DLC)?
A DLC is a payment instrument used primarily in international trade. It ensures that the seller gets paid once they present the required documents (like a bill of lading, invoice, and inspection report) confirming the shipment of goods.
What Is a Standby Letter of Credit (SBLC)?
An SBLC acts more like a guarantee than a payment method. It’s triggered only if the buyer defaults — meaning it “stands by” in case of non-performance. It’s used more often in project finance, real estate, or structured transactions as a backstop.
DLC vs SBLC: Key Differences
| Feature | Documentary LC (DLC) | Standby LC (SBLC) |
|---|---|---|
| Use Case | Payment guarantee for trade in goods | Performance or payment guarantee |
| Trigger | Presentation of required shipping documents | Only triggered in case of non-payment or default |
| Common Users | Importers/exporters | Project sponsors, real estate developers, service contractors |
| SWIFT Code | MT700 | MT760 |
| Bank Role | Facilitates payment flow | Acts as guarantor |
When to Use an SBLC vs a DLC
Choose a DLC if:
- You’re shipping goods internationally
- The buyer and seller need mutual security
- You're working with established trade terms (FOB, CIF, etc.)
Choose an SBLC if:
- You need to guarantee performance or repayment
- The deal involves services, milestones, or deferred obligations
- You want to strengthen your position with a private lender or investor
Need Help Deciding Between SBLC or DLC?
Financely helps sponsors, brokers, and business owners structure the right LC for their deal — and coordinates with issuing banks or private providers to get it done.
Submit a Deal Book a 1:1 CallCan You Use Both in the Same Deal?
In some cases, yes. For example, a DLC can be used for goods, while an SBLC backs a performance clause or milestone payment. Financely can help you evaluate and structure hybrid setups for complex transactions.
Not sure what your deal needs? Send us the details and we'll help you map out the right LC strategy.
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