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Guarantees
and Standby Letters
of Credit (SBLCs)

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Understanding Guarantees & Standby Letters of Credit (SBLCs) in Trade Finance

Guarantees and Standby Letters of Credit (SBLCs), collectively referred to as Undertakings, are among the most widely used trade finance instruments after Commercial Letters of Credit (LCs).

Unlike commercial LCs, Undertakings serve as risk mitigation tools, activated only in the event of a default. Their applications span multiple industries:

  • Government Contracts
  • Financial Markets
  • Lease Arrangements
  • Large-scale infrastructure projects
  • Goods and services transactions

In markets like the United States, the use of Undertakings is steadily growing, with banks managing increasingly large portfolios.

Challenges in Managing Guarantees & SBLCs

Financial institutions struggle with the non-standard nature of Guarantees and SBLCs, requiring expert review. Unlike Letter of Credit (LCs), which are short-term and self-liquidating, some Undertakings are perpetual or auto-renewing, needing specialized handling.

Non-Standardized Nature

Unlike Commercial LCs, Undertakings are customized, requiring expert review and approval before issuance.

Longer Durations & Evergreen Clauses

Unlike short-term LCs, some Undertakings are perpetual or auto-renewing, requiring specialized handling.

Slow Turnaround Time

Issuance is delayed due to internal compliance checks across multiple applications.

Our Solutions

How ClearTrade Transforms Guarantee & SBLC Processing

The ClearTrade  Undertakings Module addresses challenges by automating the text review, validation, and finalization of Undertakings securely and structured between the bank and its clients

Key Features & Capabilities

01

Automated Text Review & Clause Identification

  • Extracts and identifies all key data elements in the submitted undertaking text
  • Recognizes critical clauses such as Governing Law, Assignment, Auto-renewal, Evergreen, Extend or Pay, Transferability, Force Majeure, etc.
  • Identifies non-compliant clauses with supporting rationale and suggestions for clause replacement

02

Conflict Identification & Actionable Recommendations

  • Identifies key actionable or inconsistent entities and highlights any conflicts
  • Provides actionable recommendations with rationale for conflicts to ensure alignment with regulatory and bank-specific policies

03

Seamless Text Negotiation & Workability Checks

  • Facilitates collaborative negotiation between the bank and the client, ensuring clarity and agreement on Undertaking Terms
  • Ensures compliance with bank policies and regulatory requirements before issuance

04

Sanctions & Compliance Screening

  • Ensures internal workability compliance with ability to validate KYC and Facilities
  • Extracts key nouns and entities from the Undertaking text for sanctions screening and TBML risk assessments
  • Enhances regulatory compliance by automating screening against global watchlists

05

Digitization of Guarantee Applications & Issuance Process

  • Converts manual Guarantee/SBLC application forms into fully digital structured workflows
  • Converts non-standard text into an editable digital format for ease of issuance
  • Validates key application data and clauses to ensure accuracy, consistency, and completeness before issuance

Connecting All Key Stakeholders in the Guarantee Issuance Process

Unlike traditional solutions that focus only on operational processing, ClearTrade’s Guarantees & SBLCs Module seamlessly connects all personas involved in the issuance process, including

  • Applicants
  • Beneficiaries
  • Trade Operations Teams
  • Product, Credit Sanction & Legal Teams

By streamlining the entire lifecycle of Guarantees and SBLCs (Standby Letters of Credit), ClearTrade® ensures faster processing, reduced manual effort, enhanced compliance, and improved risk management

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We look forward to welcoming you at the W Hotel Doha on 24th June 2026.

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The Cleareye.ai Events Team