Ann: Trading Halt, page-59

OK I've done a little research further, and from what I can gather there are two different types of letters of credit as listed below.

1. Financial SBLCThe financial-based SBLC guarantees payment for goods or services, as stipulated in the agreement. For example, if a crude oil company ships oil to a foreign buyer with an expectation that the buyer will pay within 30 days from the date of shipment, and the payment is not made by the required date, the crude oil seller can collect the payment for goods delivered from the buyer’s bank. Since it is a credit, the bank will collect the principal plus interest from the buyer.

2. Performance SBLCA performance-based SBLC guarantees the completion of a project within the scheduled timelines. If the bank’s client is unable to complete the project outlined in the contract, then the bank promises to reimburse the third party to the contract a specific sum of money.Performance SBLCs are used in projects that are scheduled for completion within a specific timeline, such as construction projects. The payment serves as a penalty for delays in the project’s completion, and it is used to compensate the customer for the inconvenience caused or to pay another contractor to take over the project.


First is supplied to cover the seller and is supplied by the buyer. Second supplied by the seller to cover prospective buyers. While it's a bit unclear as to which one we would need, but I'd lean towards the second. In this case we would expect to have a buyer to potentially be getting announced too if we have been successful in obtaining the letter.

Welcome further knowledge on this as im really not up to speed on how this works in real world scenarios.