Letter of Credit’s
A letter issued by a bank to another bank (typically in a different country) to serve as a guarantee for payments made to a specified person under specified conditions. Documentary Letter Of Credit is one of the most important means of financing in the international trade,as the letter of credit is a tool that removes most of the risks as from the buyer (importer) and from the seller (exporter). Documentary Letter Of Credit is a very flexible and convenient tool for calculations, which have the widest recognition and acceptance in the world. importers dealing with foreign suppliers don’t want to pay upfront for goods that may not correspond to purchase order specifications or may arrive late, if ever. Naturally, buyers would prefer to postpone payment until they receive the goods as expected. Letters of credit can prevent buyers from losing deposits when the sellers’ performance is deficient in any way. Without the letter of credit, buyers are left to fend for themselves to recover their deposits if goods are not produced according to spec. For both buyers and sellers in a given transaction, letters of credit represent a reasonable compromise that protects both sides’ interests by assuring exporters that they will get paid once they produce and ship the goods according to certain documentary requirements that in turn protect importers’ interests. This is akin to an escrow arrangement, ensuring exporters that the goods won’t be released until they get paid and providing buyers with a guarantee that they will get the goods if the exporter is paid. Remember that Secure Platform Funding offers unsecured letters of credit, something most other financiers do not. Unsecured means you do not have to tie up valuable collateral to open a letter of credit.
Standby Letter of Credit
A guarantee of payment by a bank on behalf of their client. It is a loan of last resort in which the bank fulfills payment obligations by the end of the contract if their client cannot. Using a Standby LC in business transactions is an indication of good faith and proof of financial credibility and repayment capabilities of a buyer. Standby LC is widely used in commodities trading when it is necessary to buy the goods from a local supplier or foreign exporter. SBLC can be also used as a security to obtain credit lines and is ideal for the company, which plans to expand its business but does not want to utilize its assets. Standby LC should be always issued as an Irrevocable financial instrument and cannot be canceled or revoked since it has been issued & transmitted via authenticated MT-760 SWIFT message by an issuing bank. It is possible to assign a Standby LC to another beneficiary in accordance with written instruction from the first beneficiary. The bank, which performs such transfer has to notify the issuing bank of the amount to be transferred and the effective date of the transfer.