03.06.2024: LETTERS OF CREDIT

29.05.2020: LETTERS OF CREDIT

What do you think are the key challenges of international trading? For an exporter, the primary concern is to minimise the risk of non-payment by the importer. For an importer, the major challenge is to ensure that all goods are delivered as per specifications and on time. So what do you think will help protect the interests of both?

The answer is – a letter of credit.

SUISSE BANK is a globally-recognised offshore banking institution, helping businesses engage in profitable and hassle-free foreign trading experiences. Having built a good reputation in the banking and trade finance industry, the organisation emerges as a preferred banking partner for a wide range of financial instruments that aid in international trading. Of these, a letter of credit is one of the most powerful tools that global companies can use to expand their business overseas by mitigating the risks.

What is a Letter of Credit?

LC is a complex financial instrument that protects the interests of both the buyer and the seller. It is ideal documentation when both the parties are new to trading and the risks associated with the supply of goods and fulfilment of payment are covered by a reputable banking institution. SUISSE BANK is a trusted banking partner for international trading, offering two primary types of LC – Standby Letter of Credit (SBLC) and Documentary Letter of Credit (LC).

•    Standby Letter of Credit: A SBLC is typically issued to protect the interests of the importer or the buyer. With a standby letter of credit, the bank guarantees that even if the importer becomes bankrupt, ceases operation or is unable to fulfil their payment obligations, all conditions and obligations as per the trade contract will still be fulfilled. In such a scenario, the bank makes an undertaking to the exporter (beneficiary), guaranteeing to perform the payment on behalf of the client.

•    Documentary Letter of Credit: The bank also provides documentary letters of credit, safeguarding the rights of the exporter to receive full payment by the importer. The financial instrument enables the seller or the supplier (beneficiary) to minimise the risks related to non-payment of goods delivered. Herein, the bank functions as the mediator and helps mitigating the risks of losing money in foreign trading. However, the payment is only performed against presenting all necessary documentation as mentioned in the LC.

A letter of credit can also be issued for the trading of services.  

Advantages of a Letter of Credit by SUISSE BANK

•    Expand your business into newer and lucrative markets in a safe and reliable manner. The solvency of a new or unknown trading partner is replaced with the credibility and solvency of a reputable banking institution such as SUISSE BANK

•    The seller or the exporter receives full and timely payment for goods delivered on fulfilling the terms and conditions mentioned in the letter of credit

•    LC serves as a credit-worthiness certificate for the importer, backed by the trustworthiness and financial stability of a leading institution like a bank

•    The exporter is free of any kind of credit risks

So you can understand how a letter of credit from a premier financial institution such as SUISSE BANK can aid in quick, reliable and hassle-free international trading. 

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