Standby DC

• Reduces the risk of non-payment for your open account transactions
• Leverages the credit standing of a parent/related company or even your buyer to secure your banking facilities.
• Provides immediate payment through simple documentation in the event of non-payment or non-performance of an agreement
• Available in countries, like the USA, where bank guarantees are not allowed


Do you have a customer that wants to trade on open account but you are concerned about the payment risks? Are you a subsidiary company that needs credit facilities but hasn't yet established the necessary credit standing or track record? If you are in either of these situations, then consider asking for a Standby Documentary Credit (SDC).

How do SDCs work?

A Standby Documentary Credit, which may be subject to ICC rules and regulations UCP500 or preferably ISP98, is usually used as a guarantee of payment. The Beneficiary of the credit makes a claim in the event of non-performance or non-compliance of an agreement or a contract by submitting the stipulated documents - normally a signed statement certifying a default or non-performance, accompanied by sight drafts for the amount claimed.

Facility Guarantee

SDCs are used if you would like a third-party such as a parent/related company or your buyer to facilitate your obtaining a credit facility. In fact, the most common types of SDC today is opened on behalf of a parent company, in favour of the lending bank, to guarantee facilities granted to its subsidiary. This enables you to leverage the strength of one entity (credit standing, track record, capital, etc.) to support a weaker one. It is not always a matter of relative strength and often the SDC is used to consolidate bank relationships in one office for convenience and control.

Other Common Uses:

• To cover a default or non-performance of an agreement or a contract;
• To be used as an alternative to performance and bid bonds;
• To support open account trading;

For further information, please call our Customer Service Centre on 4 4722 24 or stop by at your nearest HSBC branch.You could also contact us via e-mail.