A Standby Letter of Credit (SLOC) is a financial instrument issued by a bank that serves as a guarantee for a buyer's payment to a seller. It assures the seller that they will receive payment if the buyer fails to fulfill their contractual obligations. This type of credit is often used in international trade and large transactions to provide security and build trust between parties. In the event that the buyer defaults, the seller can present the SLOC to the bank, which will then pay the agreed amount. This mechanism helps facilitate business transactions by reducing risk and ensuring that both parties are protected.