Letter Of Credit

Letters of Credit

Letters of credit are financial trade instruments used to facilitate international transactions while reducing risk for both buyers and sellers.

Why use LC and when?

Being a very flexible payment instrument, LC offers various opportunities for reduction of risk and spreading it between partners. LC can be compared to the work of a tailor: the parties get the result that fits their needs.

LC can be used if:

  • The buyer and the seller do not know each other well enough – the other party is unfamiliar,
  • Cooperation experience is short-term and the trust is little;
  • One party or both parties are located in an economically or politically unstable country (region);
  • The legislation of one or another country requires the use of the LC;
  • The goods constitute a special order or are very specific;
  • The goods are price-sensitive;
  • If the buyer or intermediary has no money of its own it can carry out the transaction only by using the LC;

General terms:

  • Client pays commissions for the issuance of the LC in line to the banks terms and conditions.
  • The LC can be issued against customer’s own funds or through a credit limit secured by real estate collateral of other acceptable securities.

Import LC:

Import Letters of Credit are conditional payment undertakings issued by us to your supplier on your behalf. They secure payment for your supplier providing they meet the terms of the Letter of Credit – for example, presentation of documents as agreed in the terms of the LC.

This gives you more control, which can be a particular advantage when buying from new suppliers.

Import letters of credit can also enhance your trading capabilities by supporting your credit status.

They can also be valuable for negotiating preferential terms such as a longer credit period or lower prices.

Export LC

Export letters of credit are conditional payment undertakings issued by your buyer’s bank on their behalf.

They give you certainty that you will receive payment for the goods you export, provided you meet the terms of the letter of credit.

If you ask us to confirm the letter of credit, you will have protection against payment default by the buyer’s bank, by interacting with us as Your bank.

In addition to being a secure and fast way to receive payment, export letters of credit enable you to manage your cashflow more effectively by giving you a known payment date, currency and amount.