Can Standby Letters of Credit be traded or sold?
Legitimate standbys are not intended to be investment instruments and there is no established market for trading them. You would need to see the non-operative SLC and verify its authenticity. Who is the beneficiary? Who is the applicant? And what is the contact or performance being guaranteed? There are many Letter of Credit scams going around. These scams usually involve selling or trading Standby Letters of Credit. Legitimate LOCs are not intended to be investment instruments and there is no established market for trading them. Although an active Letter of Credit, depending its terms and conditions, can usually be hypothecated, discounted, or forfeited (the financial equivalent to factoring) for quicker access to funds, this is not a procedure to be embarked upon by the inexperienced. A Letter of Credit may be written for a short period of time, covering one shipment of goods, or may be written for a greater amount and for a longer period of time in order to cover say, a year’s worth
