#Letters of credit (LCs)

[axioscreditbank]

Letter of credit (LC) & Standby Letter of credit (SBLC) are both the most popular, & reliable trade finance instruments used by global importers & exporters in international trade to reduce the risk of payment failure & to ensure financial stability.

A Letter of credit is a primary method of payment, while Standby LC is used when there’s a risk of buyer’s non-performance during a transaction. So, what is the difference between an LC and SBLC? Let’s check out:

Letter of Credit Vs Standby Letter of Credit

Both the letter of credit (LC), and the Standby letter of credit (SBLC) are payment guarantee instruments used in international trade. In this article, we’ve discussed the key differences and usage between LC and SBLC. Take a look:

What is a Letter of Credit?

Under a letter of credit service, the issuing bank guarantees an on-time & full-fledged payment to an exporter on behalf of its client ie. importer for the ordered goods or services. But in the event, if the importer defaults in payment or is unable to fulfill the terms & conditions of the LC contract, then, the issuing bank will compensate the beneficiary ie. the exporter.

Read more: https://www.axioscreditbank.com/blogs/key-differences-between-a-letter-of-credit-standby-lc

[infocrazebyrepwoop]

Bangladesh Importers Open $68.19bn in LCs for FY24

Bangladesh importers opened letters of credit (LCs) totaling $68.19 billion in FY24, marking a 1.85% increase from the previous year, according to Bangladesh Bank (BB) data. In FY23, the amount of LC openings was $66.95 billion. In FY22, it was recorded at $90.43 billion. Central bank data also showed that settlements were recorded at $66.0 billion against the $68.19 billion in LC openings in…

[letters-of-credit]

Secure Your International Trade _ Letters of Credit_ Express Trade Finance _ Dubai

[prominencebank]

Dive deep into the intricacies of Letters of Credit, unraveling their significance in global trade, with expert insights from Prominence Bank.

[aiolegalservices]

AIO Business and Startup Support- Companies Formation & Flag Registration and Securing Fund

AIO Legal Services is currently offering financial support and offshore registration assessments for businesses and startups around the world. AIO Legal Services as  a Qualified Intermediary (QI) at the Marshall Islands Registry, has the ability   to provide your business with a range of services, including: • Company formation; • Flag registration; • Due diligence preparation and…

[emeriobanque]

What is a Transferable Letter of Credit?

A Transferable Letter of Credit is a letter of credit facility where the first beneficiary can transfer some or all of the credit to another party, known as the second beneficiary. This type of letter of credit gives the seller/exporter the authority to instruct the bank to pay or make the credit available completely or partly to one or more secondary beneficiaries.

Transferable Letter of Credit Definition

Let’s understand the meaning of Transferable LC in simple words. A transferable letter of credit is a trade finance instrument that allows the first or original beneficiary to transfer some or all the right of payment to another party, which creates a second beneficiary.

The party that initially accepts the transferable letter of credit issued by the importer’s bank is referred to as the first, or primary beneficiary. A transferable LC is often used in international trade transactions to ensure timely payment to the supplier or manufacturer.

Key Takeaways:

1. The ultimate agenda of a transferable Letter of credit is to enable the original or initial beneficiary to transfer the right of payment to another beneficiary which they owe. 2. The first beneficiary is authorized to transfer part or all of the right of payment to a second beneficiary. 3. Since applying for a letter of credit is a much more detailed process and can lead to payment delays and additional fees, issuance of a transferable LC ensures sound cash flow for third-party manufacturers. 4. The parties involved in a transferable letter of credit, in addition to the bank, include the applicant (the buyer of goods/service), the first beneficiary (A retailer or broker), and the second beneficiary (A supplier or manufacturer).

How Does a Transferable Letter of Credit Work?

As we know that a letter of credit is a legal document issued by a bank, guaranteeing that a seller will receive the payment from a buyer on time for delivered goods or services. If the buyer fails to do so, the issuing bank will compensate the seller.

When you apply for a transferable LOC, it should be strictly mentioned as such by the issuing bank. By obtaining a transferable letter of credit, the first beneficiary is capable of transferring an LC to another, who then is known as the second beneficiary.

Once named as a second beneficiary, it possesses all the same rights as the original does. The original beneficiary then can request the bank to transfer a part or all the credit to the second beneficiary.

This second beneficiary might, for example, be a supplier or manufacturer that the seller is relying on to send the ordered goods to the buyer. In this type of arrangement, the first beneficiary is acting as a sort of middleman between the buyer and the third-party supplier. Thereby, there can be more than one secondary beneficiary.

In an LC agreement, a seller (first beneficiary) has a sale to execute with the buyer but is unable to complete the merchandise order from the manufacturer. By transferring a portion of transferable letters of credit to the manufacturer, ie. third-party supplier, the seller provides them an assurance of payment by leveraging the buyer’s banker’s credit and utilizes this LC to purchase those goods on time.

How to Apply for a Transferable Letter of Credit?

The process of applying for a transferable LOC is almost the same as applying for a loan. Here are a few steps to follow:

Step 1 — Buyer Requests

The buyer/importer must submit an application to its bank with a request to issue a transferable letter of credit in favor of the exporter/seller.

Step 2 — Evaluation By Buyer’s Bank

The bank will then analyze & evaluate the buyer’s credit score and financial stability in the underwriting process. Underwriting is simply a procedure banks conduct to assess how much risk a borrower poses and determine whether to grant them credit or not.

Step 3 — Review By Exporter’s Bank

After the approval, the bank will draft the transferable LC based on the terms & conditions mentioned in the sales agreement. Then it forwards the LC to the exporter’s bank which then further checks for any discrepancies and sends it to the exporter.

Step 4 — Shipment of Goods

After getting the LC, the exporter will then ship the goods to the buyer and submit the necessary documents to its bank.

Step 5 — Exporter’s Bank Forwards The Documents

The exporter’s bank reviews the submitted documents by its client, ie. the exporter to make sure they comply with the terms & conditions of the LC contract. If any errors or discrepancies occur, they get fixed. Once the documents are approved, the exporter’s bank will forward them to the buyer’s bank.

Step 6 — Release of Payment

The buyer’s bank checks the documents thoroughly and checks the delivery of goods with the buyer. If everything seems right, the bank releases payment to the exporter’s bank and later collects the same from the buyer.

Transferable Letter of Credit Vs Confirmed Letter of Credit

A transferable LC is a much more convenient & favorable option for the buyer than a confirmed LC. It’s because the buyer is only required to interact with one bank for a transferable LOC.

While in the case of a Confirmed letter of credit, the buyer must obtain two letters of credit to provide an additional payment guarantee to the seller, with the second one guaranteeing the first one. This type of trade finance instrument is issued in cases where the seller isn’t assured of getting payment from the first bank (buyer’s bank). In such a case, a second bank that the seller is familiar with issues an LC to support the first one.

Transferable Letter of Credit Vs Back-to-Back Letter of Credit

A Back-to-Back Letter of Credit involves the issuance of two letters of credit to finance a single transaction when a middleman is involved between the buyer and seller, such as a retailer or broker. It enables the first beneficiary to transfer the original LC as a payment security in favor of the second beneficiary, ie. the supplier.

But a Back-to-Back LC is a bit different from a transferable letter of credit. Here, Instead of issuing an LC to the supplier, the first beneficiary requests the buyer to issue a transferable LC in favor of the second beneficiary.

Transferable Letter of Credit Vs Non-Transferable Letter of Credit

An LC can be transferable or non-transferable. If a bank issues a transferable LC, the word “Transferable” is mentioned on it. In the absence of such a word, an LC is deemed to be a non-transferable LC.

A transferable LC is often used in international trade transactions to provide timely payment assurance to the supplier or manufacturer. Letters of credit are an important trade finance tool in business transactions between buyers and sellers, especially if the parties reside in different nations or there is a lack of trust. Transferable letters assure both the sellers and their suppliers that they will be paid for their goods & services.

Originally published at https://www.emeriobanque.com.

[financesevaloan]

Working Capital Loan

A working capital loan is a loan used to conduct day-to-day operations of a business and this is also known as working capital.

Without a free flow of how to manage working capital loans, an organization may find itself unable to function efficiently. Thus, to ensure seamless operational performance of the business, you can opt for a Working Capital Loan.

What is a Working Capital Loan?

This type of loan is availed to fund the day-to-day operations of a business, ranging from payment of employees’ wages to covering accounts payable.  

Not all businesses see regular sales or revenue throughout the year, and sometimes the need for capital to keep the operations going may arise.  

This happens when the companies have any seasonal business cycles or cyclical sales, while some other may require such a loan during festive seasons or periods of reduced business activity.

A working capital loan can be obtained in the form of secured backend by collateral and unsecured in which you are not requirement of working capital loan to pledge collateral to avail of the loan, depending on the loan amount and the business financial health.  

A company’s working capital is also a reflection of its financial health and liquidity position.

Types of Working Capital Loan

Overdraft Facility or Cash Credit

Term Loan

Bank Guarantee

Packing Credit  

Letter of Credit

Accounts Receivable Loan

Post Shipment Finance

[radission]

Issuers Of Standby Letter Of Credit Sblc

Standby letter of credit SBLC is a type of letter of credit (LC) that guarantees payment to beneficiaries in case of default on their loan. SBLCs are often used by lenders to secure loans for borrowers who pose a high risk. If the borrower is unable to repay the loan, the SBLC issuer promises to reimburse the lender the total amount. Issuers Of Standby Letter Of Credit SBLC are generally a bank or other financial institution and they levy a certain fee for their services. SBLCs are often used in global trade transactions to finance the purchase of goods and services. Radission, a USA-based global trade finance company is a reputed Issuer Of Standby Letter Of Credit Sblc has a long history of offering clients high-quality financial guarantees. We are the leading Issuers Of Sblc And Lc across the globe With years of experience in the field. Radission has the knowledge and the resources to offer its clients the best services and provides support and guidance to clients throughout the process. Contact us today to find out about our services and how we can help your business create and succeed.

[tradefinancecompany]

What Are The Facts You Need To know About Trade Finance Companies?

Trade finance makes import-export business transactions likely for an individual variety, from a small business introducing its initial private-label product from abroad to an International Company importing or exporting vast quantities worldwide each year. To cover the cost of the goods, they intend to purchase or sell; smaller businesses typically have minimal access to loans and other forms of interim financing. Many banks will only provide loans or overdraft protection for these transactions if there is a confirmed order for the products. Some fundamental estimation is that over 80 percent of overall trade depends on buy and sell financing, which assists goods and keeps moving even when Trade Finance Company doesn’t have sufficient cash flow inside to business the transactions themselves.

[shongjogyou]

এল সি (লেটার অফ ক্রেডিট) খুঁটিনাটি বিষয়সমূহ

এল সি (লেটার অফ ক্রেডিট) খুঁটিনাটি বিষয়সমূহ

আমদানি কিংবা রপ্তানির ক্ষেত্রে আর্থিক লেনদেন করার প্রক্রিয়াটিতে অনেক ব্যবসায়ীকেই চিন্তাগ্রস্থ হতে হয়। যিনি কিনছেন বা বায়ার ঠিকমত টাকা দিবে কিনয়া কিংবা এক্সপোর্টার বা যিনি পণ্য পাঠাচ্ছে তিনি ঠিকমত পণ্য দিলো কিনা বা আপনার পেমেন্ট ঠিকমত পেলো কিনা! এছাড়া কাগজপত্রে কোন ঝামেলা আছে কিনা ইত্যাদি সমস্যার সম্মুখীন হতে পারে ব্যবসায়ীরা। আর এই সকল সমস্যার সুন্দর ও বৈধ সমাধান হচ্ছে এল সি পেমেন্ট পদ্ধতি।…

[axioscreditbank]

Applying for a letter of credit (LC) with a bank for overseas transactions can be a complex process, but with careful planning and attention to detail, it can be a smooth and successful experience. An LC is a payment guarantee letter issued by a bank that guarantees payment to the seller for goods or services delivered to the buyer. Here are the steps to apply for an LC with a bank for overseas transactions.

Identify the Need for an LC: The first step is to determine whether an LC is needed for the overseas transaction. An LC provides a guarantee to the seller that they will receive payment, which can help to mitigate the risk of non-payment and secure the transaction.

Choose a Bank: The next step is to choose a bank that will offer a letter of credit service. Look for a bank that has experience with international trade and a good reputation in the global trade community.

Submit an Application: Submit an application to the bank for an LC. The application will typically require detailed information about the transaction, including the amount, currency, and terms of the LC.

Provide Required Documentation: The bank will require documentation to support the LC application, such as the purchase agreement, invoices, and shipping documents. Ensure that all documentation is accurate and complies with the terms of the LC.

Read more: https://www.axioscreditbank.com/blogs/how-to-get-a-letter-of-credit-from-a-bank-to-import-goods-from-overseas

[usaitbari]

SBP rejects rumors about restrictions on opening LCs for import of crude oil, LNG - SUCH TV

SBP rejects rumors about restrictions on opening LCs for import of crude oil, LNG – SUCH TV

The State Bank of Pakistan (SBP) Thursday rejected rumours that the government has imposed restrictions on the opening of Letters of Credit (LCs) or contracts for the import of crude oil, liquefied natural gas (LNG) and other petroleum products. In a brief statement, the central bank said: “Such information is being spread with ulterior motives to create uncertainty in the market.” Earlier, new…

[letterofcreditwithoutcollateral]

There are a few things to keep in mind when considering Issuers Of Letter Of Credit Without Collateral.

There are a few things to keep in mind when considering Issuers Of Letter Of Credit Without Collateral. The first is that the issuing bank will be taking on all the risk in the event that the borrower defaults on the loan. This means that the issuing bank will need to have a strong relationship with the borrower, and will need to carefully consider the borrower's ability to repay the loan. The second is that the issuing bank will need to have a good understanding of the project that the loan is being used for, in order to assess the risks involved. Finally, the issuing bank will need to be comfortable with the idea of taking on the entire loan amount in the event of a default.

[credlixindia]

Unlock Global Opportunities: Trade Finance Solutions for SMEs

Empower your SME to conquer international markets with Credlix's tailored trade finance solutions. Access the capital you need to expand your global footprint, manage risks, and optimize your cash flow Trade Finance Solutions.

Trade Export Finance: Your Gateway to Global Success

In today's interconnected world, Small and Medium Enterprises (SMEs) are increasingly looking beyond domestic borders to expand their businesses. However, navigating the complex landscape of international trade can be daunting, especially when it comes to securing the necessary financing. This is where trade finance comes into play.

What is Trade Finance?

Trade finance is a specialized form of financing that facilitates international trade transactions. It involves a range of financial products and services designed to mitigate the risks associated with cross-border trade. By providing financial support, trade finance empowers businesses to:

Secure Letters of Credit (LCs): A secure payment mechanism that guarantees payment to the exporter upon fulfillment of specific conditions.

Obtain Export Credit Insurance: Protect against potential risks such as buyer default, political instability, and currency fluctuations.

Access Working Capital Facilities: Fund day-to-day operations and inventory, especially during the export cycle.

Benefit from Forfaiting: Sell future receivables at a discount to receive immediate cash flow.