Letter of Credit

Letter of credit is an undertaking, usually on the part of a bank and at the request of one of the bank’s customers, to pay a named beneficiary a specified amount of money (or to deliver an item of value) if the beneficiary submits documents in accordance with the terms and conditions specified in the letter of credit as agreed in the contract of sales.

Types of Letters of Credit that we offer include:

• Irrevocable Import Letter of Credit means the credit cannot be amended or canceled without the agreement of all parties (the beneficiary, the applicant and the issuing bank)
• Standby Letter of Credit - these types of credits are not specifically related to the movement of goods; rather, they are similar to guarantees. Like a performance guarantee, a standby letter of credit allows the beneficiary to withdraw in the event of default on a contract, provided that the complying documents are presented. 
• Export Letter of Credit is a guarantee for the Exporter that will be paid after delivering the goods and services as requested/decided on the sales contract.

Advantages of using letters of credit for importers:

If you are an Importer than a letter of credit helps to avoid the risk involved with the failure by the seller to fulfill the delivery obligations. The imported goods must be delivered in accordance with the conditions stipulated in the letter of credit and the specified documents will be received relatively soon. By issuing a letter of credit an importer confirms his solvency and may gain more favorable payment conditions in the future.

Advantages for exporters of using letters of credit:

If you are an Exporter using a letter of credit allows you to avoid the risk of non-payment for goods provided, as the issuing bank pays out the sum independently of the importer. The buyer cannot deny payment. Any claims regarding the goods provided have to be presented by the importer separately from the letter of credit, giving the exporter a considerable advantage.