Standby vs. Best Efforts Underwriting

The underwriters will make every attempt to sell all of the securities being offered in a best efforts underwriting, but they are not required to do so under any circumstances. This form of underwriting agreement is generally used when the demand for a particular product is projected to be low. Any unsold securities will be refunded to the investor under this kind of arrangement.
The underwriter merely offers to do their utmost to sell shares, as the term implies. Because the underwriter is not accountable for any unsold shares, the risk to the underwriter is reduced. The issuance might also be canceled entirely by the underwriter. The underwriter is paid a fixed price for its services, which it forfeits if the issuance is canceled.