Standby letter of credit vs bank guarantee: SBLC, URDG 758 and ISP98

A standby letter of credit (SBLC) and a demand guarantee do the same job: a bank promises to pay the beneficiary if the applicant fails to perform, against a demand and the documents the undertaking requires. They differ mainly in the rules they follow and where they are used: standbys are common in the Americas and are almost always issued under ISP98 or UCP 600, while guarantees are common in Europe and may follow URDG 758 or no rules at all.

Checked against official sources: 2026-10

At a glance

PurposeA bank undertaking to pay the beneficiary against a complying demand if the applicant does not perform

Standby rulesPractically every standby is issued subject to ISP98 or UCP 600

Guarantee rulesGuarantees often operate without reference to any rules; ICC URDG 758 is the main rule set

URDG 758In effect since 1 July 2010

Where usedStandbys generally in the Americas; demand guarantees serve the same purpose in Europe

Demand under URDG 758Must include a statement of how the applicant is in breach of the underlying relationship

RejectionUnder URDG 758 a guarantor rejecting a demand must send a notice listing all discrepancies within five business days

ConfirmationA complying presentation to a standby's confirmer always obligates the issuer

Same purpose, different rules

Both instruments secure the applicant's performance, for example a bid, an advance payment, a performance obligation or a payment. A standby is a letter of credit used in the role of a guarantee. According to an ICC analysis, guarantees often operate without reference to any rules, while practically every standby is issued subject to ISP98 or UCP 600. Standbys are generally used in the Americas, and guarantees serve the same purpose in Europe.

URDG 758: the ICC rules for demand guarantees

In effect since 1 July 2010.
A demand must come with the documents the guarantee specifies and a statement of how the applicant is in breach of its obligations.
A guarantor that rejects a non-complying demand must send a rejection notice within five business days listing all the discrepancies.
When a beneficiary asks the guarantor to extend or pay, the guarantor may suspend payment for up to 30 calendar days to allow time to negotiate.

Presentation and confirmation

A guarantee is available only with the guarantor. A standby can be confirmed, so the beneficiary may present either to the confirmer or to the issuer, and a complying presentation to the confirmer always obligates the issuer. For a beneficiary abroad, that can make a confirmed standby a stronger instrument than a guarantee, which binds only the guarantor that issued it.

Step by step

Agree in the contract whether security will be a standby or a guarantee, and for which obligation.
Name the rules: ISP98 or UCP 600 for a standby, URDG 758 for a guarantee.
Check the documents a demand must include, such as a statement of breach under URDG 758.
Ask for confirmation by a bank in your country if you are the beneficiary of a standby.
Check the expiry date and the place of presentation.
Keep the original undertaking and any amendments.

Documents you usually need

Standby letter of credit or demand guarantee
Underlying contract
Demand and statement of breach
Amendments and confirmation, if any

Common problems and how to avoid them

A demand under a URDG 758 guarantee is rejected.

What to do: Include the documents the guarantee specifies and a statement of how the applicant is in breach; the guarantor must list all discrepancies within five business days.

A guarantee is issued without any rules.

What to do: Ask for the guarantee to be subject to URDG 758, or use a standby under ISP98 or UCP 600, so the procedure is clear.

The beneficiary is worried about the issuing bank abroad.

What to do: Use a standby confirmed by a local bank; a complying presentation to the confirmer obligates the issuer.

The beneficiary asks to extend or pay.

What to do: Under URDG 758 the guarantor may suspend payment for up to 30 calendar days while the parties negotiate.

Sources

Rules change often. This note is practical guidance based on the sources above, not legal advice. Confirm current requirements with the authority, your importer or a licensed customs broker before you ship.

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Common questions

What is the difference between an SBLC and a bank guarantee?

They do the same job, but standbys follow ISP98 or UCP 600 and are common in the Americas, while guarantees follow URDG 758 or no rules and are common in Europe.

Which rules apply to a standby letter of credit?

Practically every standby is issued subject to ISP98 or UCP 600.

What is URDG 758?

The ICC Uniform Rules for Demand Guarantees, in effect since 1 July 2010.

Can a bank guarantee be confirmed like a standby?

A guarantee is available only with the guarantor; standbys can be confirmed, and a complying presentation to the confirmer obligates the issuer.

How long does a guarantor have to reject a demand under URDG 758?

It must send a rejection notice listing all discrepancies within five business days.

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