Many importers are experienced with documentary letters of credit, and know that a documentary letter of credit is a conditional bank undertaking of payment. The conditional undertaking refers to the shipping documents that must be provided to trigger payment.
Success in trade is based on capital availability. The global banking crisis showed once again how critically important it is to have access to capital. And we continued to have availability all through the bank crisis.
Let's assume that you want to arrange a $1 million shipment of goods to your home port, and you have a buyer who will pay you when he sees a copy of the bill of lading, so that he knows the shipment is on its way. As an experienced importer, you know that your bank will generally require substantial collateral to issue the LC for you, probably the full $1 million, or a credit line for that amount. Maybe you have other deals working, or you are undercapitalized, so that you don't have the capital availability or banking relationships to support your new deal.
That's where we come in. We will arrange a documentary letter of credit for 90 days (more or less, as needed) for a nominal amount. So if you are an importer with less money available to do your deals, or if your credit line with your local bank is just about used up, but you still have deals to do, we provide the means to help you grow your import or trading business. These LC's are issued by a U. S. or top European bank and can make the difference in your business growth.
These LC's do not require you to put up collateral.
Also, and equally important, they are not based on any kind of loan to you, the applicant. Even so, the DLC's ensure that the supplier retains title to the goods until he has received payment, which is key to the success of all DLC issuance.
Our issuer has bank accounts at prime banking institutions, which are used to provide the credit lines supporting the LC issuance. But you should be aware that they are not providing a loan. Once the LC is issued, and you have a copy of the bill of lading, you will still need to provide to our bank the funds to pay your end supplier. When we receive that payment, we release in your favor the documents which control your shipment.
This type of LC is sometimes called a conditional letter of credit. It is designed in a way that allows issuance without provision of specific collateral, apart from the basic payment for the LC. We have had excellent acceptance of conditional LC's from suppliers in China, Pakistan, Bangladesh, India, many European countries, Africa, and the middle East. When you, the client, wish to open a letter of credit, we review the details of your transaction so that we can make a decision about the transaction on its merit. We can open letters of credit for any goods that do not violate our ethical and legal criteria. Prohibited transactions would include those involving weaponry or ammunition, or involving principals in countries which are on international restriction lists.
If you would like to apply for an LC, you can send an e-mail to firstname.lastname@example.org. You would then send us the completed application, a proforma invoice and a purchase order for review. We will then provide a draft of the LC for approval by your supplier. Once they have approved it........you pay for the LC issuance, and it is issued. The LC has to be paid for in advance. Our issuer provides trade LC's, and they're not in the business of partnering. You keep all the profit in the deal, less fees, of course.
Step by step LC procedures
1. The company applying for a letter of credit submits preliminary application and two other documents: proforma invoice from supplier to applicant, and purchase order from applicant to supplier.
2. We provide a draft LC based on the submitted application, as well as a request for further compliance documentation.
3. Applicant shows draft to his supplier for approval.
4. Once supplier has approved, applicant notifies us of that approval and sends in funds to take care of the LC opening fees.
5. Once funds are received by LC provider and all documentation is complete, the LC is generally issued within 72 business hours and sent by SWIFT to the beneficiary's bank.
6. Beneficiary ships goods and sends the shipping documents to the bank that issued the LC.
7. We notify applicant that goods have been shipped, and where requested, provide copies (but not originals) of shipping documents to the applicant. We also give applicant a target date by which he should have sent in the funds due to the supplier. Funds to be passed on to the supplier are expected in within three weeks of receipt of the shipping documents. Note that timing of funds due in order to pay your supplier and get the documents released are based on when goods are shipped, which may be much earlier than the expiration date of your LC.
8. Applicant wires in money to satisfy amount due the supplier.
9. Bank releases documents to the applicant, who now unloads his goods.