Mr Old Man Payment Q&A ADVANCE PAYMENT & SBLC By Mr Old Man Posted on 4 weeks ago 2 min read 0 0 18 Share on Facebook Share on Twitter Share on Google+ Share on Reddit Share on Pinterest Share on Linkedin Share on Tumblr ANSWER Dear Mr. Old Man, Good day! The seller and the buyer agree to sign a sale contract with the following terms and conditions: The buyer will pay in advance the full contract value. The seller will effect shipment upon receipt of full payment from the buyer. Can the buyer request the seller to provide an SBLC to guarantee advance payment in the event the seller fails to ship the goods within stipulated time? Thank you for your guidance. Ms. Woo ——- ANSWER Dear Ms. Woo, Thank you for your follow-up. If the buyer is paying the full contract value in advance and shipment is to follow, it is reasonable and prudent for the buyer to request a guarantee to secure that advance payment. In such cases, a Standby Letter of Credit (SBLC) structured as an advance payment guarantee — or a traditional advance payment bond — is appropriate. A performance bond, which typically covers only a small percentage (2–10%) of the contract value, is not suitable in this scenario, as it does not fully protect the buyer’s advance payment. Therefore, yes — the buyer can and should request the seller to provide an SBLC or guarantee equal to the full amount of the advance, callable in case the seller fails to ship the goods within the agreed timeframe. Best regards, Mr. Old Man