Documentary Letter of Credit
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Documentary Letter of Credit

Documentary Letter of Credit

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Scheme of Securing Contractual Obligations Using Guarantees

Are you planning to enter into a foreign trade contract and can't find an acceptable form of payment? Do you need financing for goods and services being acquired?

We offer the most optimal settlement method, allowing you to save time and money by reducing risks and obtaining financing through a documentary letter of credit.

A documentary letter of credit is an irrevocable obligation of the issuing bank to pay the party in whose favor the credit is issued (the Seller) the amount of the presented documents, provided that all conditions of the credit are met.

Benefits for the Buyer

  1. issuance of a reliable payment instrument for the benefit of the Seller without distracting the Buyer's financial resources from circulation

  2. the bank will pay the Seller only after receiving documents that comply with the terms of the letter of credit

  3. ability to obtain financing from various sources, including credit lines in foreign banks and international financial organizations

  4. ability to control the timing of goods shipment

  5. ability to provide for pre-shipment inspection of goods for compliance with certain quality standards, etc.

  6. the bank monitors the transaction flow, protects the Buyer's interests, and makes payments under the letter of credit without the Buyer's direct involvement

Benefits for the Seller

  1. presence of a solid bank payment obligation, independent of the Buyer's solvency

  2. possibility of receiving payment before the Buyer receives the goods

  3. ability to offer Buyers more competitive trade terms when a deferred payment letter of credit is issued

  4. participation in the transaction as an intermediary without using own financial resources

Requirements for Issuing a Guarantee

  1. 100% cash coverage or collateral (real estate, movable property, equipment, money in a savings account)

  2. Project or copy of the foreign trade contract

  3. Original application for the issuance of a letter of credit

Scheme of Contractual Obligations Security Using Guarantees

Scheme

  1. The Buyer applies to the Bank to issue a letter of credit in favor of the Seller

  2. The Importer's Bank issues and advises the letter of credit in favor of the Seller through its own or any other foreign bank

  3. The Seller ships the goods and prepares documents for payment according to the terms of the letter of credit

  4. The Buyer's Bank or the Foreign bank makes the payment against the presented documents