A type of arrangement that provides a secondary source of funds (capital) in case the primary source falls short of meeting funding needs. In investment banking, it is a type of underwriting in which an investment bank commits to a worst-case price, just contrary to a bought deal underwriting (where price risk is borne by the investment bank) or best-efforts underwriting (where the issuer bears price risk). In other words, it is a rights offering where a third party (an investment bank, an underwriting syndicate, an affiliate of the investment bank or an affiliate of the issuer) undertakes, prior to the commencement of the offering, to purchase any shares that are not sold to the public or any rights that remain un-exercised. A standby commitment is a guarantee (backstop) extended to an issuer whereby it can raise the funds (capital) as planned in the offering. This commitment is secured by means of an agreement between an issuer and an extender of the commitment.

This commitment can be perceived as an insurance policy that covers the case of fund shortage.

It is also known as an backstop commitment or an insured commitment.