> ## Content Index
> Fetch the complete content index at: https://blog.financely.io/llms.txt
> Use this file to discover other available public pages before exploring further.

# At What Stage Is SBLC or DLC Verbiage Agreed Before Issuance?
- URL: https://blog.financely.io/at-what-stage-is-sblc-or-dlc-verbiage-agreed-before-issuance/
- Published: 2026-10-19T23:20:19.000Z
- Updated: 2026-10-19T23:20:19.000Z
- Description: SBLC and DLC wording is set in the contract and finalised in a draft the beneficiary approves before SWIFT issuance. See each stage and what to check.
- Author: Financely Debt Advisors

## At What Stage Is SBLC or DLC Verbiage Agreed Before Issuance?

The wording of a standby letter of credit or documentary letter of credit is agreed before the bank issues anything, in two rounds. The commercial terms are fixed in the underlying contract, and the exact text is finalised in a draft that the beneficiary approves after the issuing bank has approved its client but before the SWIFT message goes out.

This guide walks through each stage in order, explains who controls the wording at each point, lists the clauses to check in the draft, and shows why getting the text right before issuance saves time, fees and disputes.

In this article

1. [The short answer](#vb-short)
2. [Underlying contract and agreed form](#vb-contract)
3. [Issuing bank approval and wording review](#vb-bank)
4. [Draft for approval](#vb-draft)
5. [Issuance by SWIFT](#vb-issue)
6. [Stage by stage summary](#vb-timeline)
7. [Clauses to check in the draft](#vb-clauses)
8. [Why amendments after issuance are costly](#vb-amend)
9. [Red flags](#vb-flags)
10. [Frequently asked questions](#vb-faq)

### The short answer

The substance of an SBLC or DLC is agreed when the parties sign the contract that the instrument supports. The exact wording is agreed during the draft review that follows the issuing bank's credit approval. Issuance is the last step, not the first, and the beneficiary should never accept an instrument whose text it has not seen and approved.

### 1\. Underlying contract and agreed form

The first and most important stage is the commercial contract. For a DLC, that is usually the sale and purchase agreement. For an SBLC, it is the loan, lease, supply or performance contract the standby supports.

**For a DLC,** the payment clause sets the instrument type, amount and currency, tenor, expiry, the documents to be presented, the Incoterm, ports of loading and discharge, the shipment window, whether partial shipments are allowed, who pays bank charges and whether the credit must be confirmed by a bank in the seller's country.

**For an SBLC,** the beneficiary usually dictates the text. Lenders, lessors and suppliers often attach their required wording to the contract as an annex, known as the agreed form or form of SBLC. It sets the drawing conditions, the wording of the demand, the governing rules, the expiry and any extension mechanics.

Anything left vague at this stage becomes a negotiation later, when the shipment date or loan drawdown is close and leverage has shifted. Our guide to the [differences between UCP 600, ISP98 and URDG 758](https://www.financely-group.com/difference-between-ucp-600-isp98-urdg-758?ref=blog.financely.io) explains which rules suit which instrument.

### 2\. Issuing bank approval and wording review

The applicant, the buyer or borrower, applies to its bank to issue the instrument. The bank runs KYC, credit approval and checks its collateral or credit line before it will commit.

The bank also reviews the requested wording against its own policy. Banks commonly refuse automatic extension clauses with no final expiry, unusual demand conditions, wording that conflicts with the chosen rules and non-standard governing law. Text agreed in the contract still has to fit what the issuing bank will actually issue, which is why experienced applicants check with their bank before signing the contract.

### 3\. Draft for approval

This is the stage where the final wording is agreed. The issuing bank prepares a draft of the actual text, often laid out in the field format of the SWIFT message it will send, MT700 for a documentary credit or MT760 for a standby or guarantee.

The applicant sends the draft to the beneficiary, and the beneficiary's own bank, the advising or confirming bank, usually reviews it as well. The beneficiary checks that the draft matches the contract and contains no condition it cannot satisfy. Comments go back and forth until the beneficiary confirms in writing that the draft is acceptable.

Changes at this stage cost nothing. The same changes after issuance require a formal amendment. Our page on [the roles of issuing, advising and confirming banks](https://www.financely-group.com/issuing-bank-vs-advising-bank-vs-confirming-bank?ref=blog.financely.io) explains who reviews what.

### 4\. Issuance by SWIFT

Once the beneficiary has approved the draft, the issuing bank releases the final instrument by authenticated SWIFT message to the beneficiary's bank. For documentary credits, the issuing bank sometimes sends an MT705 pre-advice earlier to signal that the credit is coming. The advising bank then authenticates the instrument and passes it to the beneficiary, adding its confirmation if one was agreed.

### Stage by stage summary

| Stage                 | Who leads and what is agreed                                                                                                         |
| --------------------- | ------------------------------------------------------------------------------------------------------------------------------------ |
| Underlying contract   | Buyer and seller, or borrower and lender. Commercial terms, payment clause and, for SBLCs, the agreed form of wording.               |
| Issuing bank approval | Applicant and issuing bank. KYC, credit approval, collateral and confirmation that the bank can issue the requested wording.         |
| Draft for approval    | Issuing bank, applicant, beneficiary and the beneficiary's bank. Final text, field by field, approved in writing by the beneficiary. |
| Issuance              | Issuing bank. Authenticated SWIFT message to the advising or confirming bank.                                                        |
| After issuance        | All parties. Changes only by amendment with the consent of every party bound by the instrument.                                      |

### Clauses to check in the draft

**Parties and addresses.** Names must match company registration documents exactly, because a mismatch can cause a discrepancy at presentation.

**Amount, currency and tolerance.** Confirm the maximum amount and any tolerance for quantity or value.

**Expiry date and place of presentation.** A credit that expires at the issuing bank's counters abroad gives the beneficiary less time than one that expires at its own bank.

**Documents and drawing statement.** For a DLC, check every document, its issuer and its required content. For an SBLC, check the exact wording of the demand and any supporting documents. Our guide to [common LC discrepancies under UCP 600](https://www.financely-group.com/common-lc-discrepancies-under-ucp-600?ref=blog.financely.io) shows where presentations most often fail.

**Governing rules and law.** Confirm UCP 600 for documentary credits, ISP98 or URDG 758 for standbys and guarantees, and the jurisdiction for disputes. Our [URDG 758 guide](https://www.financely-group.com/demand-guarantees-urdg-758-guide?ref=blog.financely.io) covers the guarantee rules.

**Charges and confirmation.** Confirm who pays issuing, advising, confirming and amendment fees, and whether confirmation is required.

### Why amendments after issuance are costly

SBLCs and DLCs are irrevocable. Under UCP 600 Article 10 for documentary credits and ISP98 Rule 2.06 for standbys, an amendment binds the beneficiary only once the beneficiary accepts it, and the issuing bank and any confirming bank must also agree. Each amendment means a new SWIFT message, new bank charges and lost days, often close to a shipment or drawdown date. Settling the text in the draft stage avoids all of that.

### Red flags

**Treat these as warning signs.** A counterparty that wants an SBLC or DLC issued before any contract is signed, a beneficiary that refuses to review a draft, requests for an MT760 with "verbiage to be provided later", and offers of instruments from providers who are not the applicant's own bank are all signs of a transaction that is not what it claims to be. In legitimate trade and lending, the wording is always agreed before issuance.

### Need help structuring your trade or credit instrument?

Send us your contract, the instrument you need and the draft wording if you have it. We will review the structure and set out the scope of work and our fee.

[Request a Quote](https://www.financely-group.com/requestaquote?ref=blog.financely.io) 

### Frequently asked questions

When is the wording of an SBLC or DLC agreed? 

The commercial terms are agreed in the underlying contract, such as the sale and purchase agreement or the loan agreement, and the exact text is finalised in a draft for approval after the issuing bank has approved the applicant but before the SWIFT message is sent.

Who drafts the SBLC or DLC wording? 

The issuing bank prepares the final text on its own forms, based on the applicant's application. For SBLCs, the beneficiary often supplies its required wording as an agreed form annexed to the loan or lease agreement, and the issuing bank decides whether it can issue on those terms.

Can SBLC or DLC wording be changed after issuance? 

Only by amendment. Under UCP 600 Article 10 and ISP98 Rule 2.06, an amendment to an irrevocable instrument needs the agreement of the issuing bank, any confirming bank and the beneficiary, and each amendment adds time and bank charges.

What should the beneficiary check in the draft? 

That the draft matches the contract and contains no conditions the beneficiary cannot meet, including the amount, expiry, place of presentation, required documents, drawing statement, governing rules and the names and addresses of all parties.

Is Financely a bank? 

No. Financely is an advisory and arranging firm, not a bank or lender. We help clients structure trade and credit instruments and review terms, and any issuance remains subject to the issuing bank's own approval.

This article is for general information only and does not constitute legal, tax or investment advice. Instrument wording should be reviewed by the parties' banks and legal counsel. Financely is an advisory and arranging firm, not a bank, lender or broker-dealer, and does not issue letters of credit or guarantees. Any issuance is subject to the issuing bank's KYC, credit approval, documentation and conditions, and no outcome or timeline is guaranteed.