Letters of Credit

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LETTERS OF CREDIT

Keep payment and business risks at a minimum already when concluding a contract.

Choose a letter of credit, which is both a security and payment instrument for domestic and international transactions.

Reduce the risk of defaults when making deals.

Enhance the competitiveness of your company and increase your sales.

A documentary letter of credit protects the interests of both parties in a business relationship. It provides a high level of security as a payment instrument because it transfers the risk of default to the bank.

It assures the buyer of the goods that the bank will pay the amount specified in the documents proving that the goods were shipped on time, in the agreed manner, to the agreed address, and in the appropriate quantity.

It guarantees to the seller that they will receive payment for the goods sent within the agreed deadline, provided they submits documents that comply with the terms of the letter of credit.

TYPES OF LETTERS OF CREDIT

DOCUMENTARY CREDIT

It is the most widely used letter of credit and represents an irrevocable commitment of the buyer's bank (Issuing Bank) to pay the seller/contractor (Beneficiary) the value equivalent to the amount specified in the documents presented to the Issuing Bank or to the Nominated Bank, provided that the documents comply with the terms of the letter of credit.

STANDBY LETTER OF CREDIT

A letter of credit that is similar in substance to a Bank Guarantee and can act as a substitute for the latter. Its use is recommended where business partners cooperate regularly and where regular delivery of goods over a certain period of time are involved. The seller uses a standby letter of credit only as insurance if the buyer fails to meet their payment commitment on time, as the seller can request payment via the standby letter of credit only after failing to collect payment from the buyer directly with the agreed time.

TRANSFERABLE LETTER OF CREDIT

This type of letter of credit is used primarily when you act as an intermediary between the seller and the buyer. As the Beneficiary of a transferable letter of credit, you can make certain transactions without having to use your own funds or having your bank provide financing.