Letter of Credit – How an International Bank Can Help with This

At the time of conducting international business transactions, trade financing solutions such as Letter of Credit assure great security and success. And of course, the trusted international banks will help you to make the most of this trade financing procedure. The following passages of this post will help you to learn more about Letters of Credit.   

What is a letter of credit?

A letter of credit is a document from a bank assuring that the payment of a buyer to a seller will be received on time and at the right amount. In certain cases, when the buyer is unable to make payment for the purchase, the bank will cover the full amount of the purchase. This trade financing solution plays a very crucial role in fixing the international dealings that are likely to entail relevant drawbacks such as distance, different laws, incapability of knowing the business parties, etc.


How does LC this work?

A letter of credit is basically a negotiable instrument and hence, the issuing bank pays the recipient or any bank nominated by a beneficiary. The recipient can assign another person such as a corporate parent or any other third party if a Letter of Credit is transferable. However, banks generally need an assurance of security as the guarantee of processing a letter of credit.

Obviously, banks are going to acquire a fee for this service. And the fee is a certain percentage of the size of the letter of credit. However, there are several types of letters of credit including:
  1. Commercial Letter of Credit
  2. Revolving Letter of Credit
  3. Traveler’s Letter of Credit
  4. Confirmed Letter of Credit
Also, there are import Letters of Credit, export Letter of Credit, commercial letter of credit, Sight LC, Usance LC, Standby Letter Of Credit, etc. In the upcoming passages, you can learn the letter of credit (LC) advantages for sellers and for the buyers.

LC advantage for the sellers 

As a seller you can benefit from LC in numerous ways as follows:
  1. You will have the obligation of the bank of the buyer to pay for the shipped goods.
  2. You will enjoy the reduction of production risk if the buyer changes or cancels the order.
  3. You will get the opportunity to get financing during the period between the shipment of the goods and payment.
  4. You will be able to calculate the payment date for the commodities.
  5. The buyer won’t be able to refuse to pay due to any complaint about goods.     
LC advantages for the buyer

For the buyer, the LC advantages are:
  1. The bank will pay you as the seller for the commodities on condition that the document or the letter presents the determined papers in line with the terms of the LC to the bank.
  2. You as the buyer can control the time for transferring the goods.
  3. With an LC, you will demonstrate your liability to pay the debts.  
  4. For issuing an LC offered for delayed payment, the seller grants credit to you.
  5. A letter of credit allows you to avoid or reduce pre-payment.  
Remember, in order to enjoy secure LC or to resolve any other important trade financing queries, it is important for you to deal with a trusted international bank as mentioned in the concluding passage.

A reliable international bank to contact

OXFORD Investment Bank Group is one of the most trusted international banks providing a comprehensive range of financial services. They offer secure and reliable offshore banking, trade finance, and escrow services. Therefore, for acquiring Letters of Credit, contact them. Visit http://oxfordinvestbank.com to contact them or to learn more about them.

Location: Koto City, Tokyo, Japan

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