You export or import of capital goods, equipment and you have a regular flow of business with the same buyers or sellers. A possible answer to your need is a Standby letter of credit or SBLC.
The SBLC is created with the intention of not using it. It is used as bank guarantee that compensates the exporter in case that the importer defaults payment of the merchandise. The SBLC are regulated and designed in compliance with the International Stand-By Rules And Practices or ISP98.
SBLC guarantee the exporter to receive payment for the merchandise if the importer does not comply with its responsibility. SBLC are attractive for exporters not only because of what was stated before but also because of its easy way to use and manage. However, it is mostly recommended for transactions between commercial partners that have already worked together in repeated occasions.
How to use it: If unpaid at maturity, the payment for the amount that the SBLC represents is immediately payable, subject to submission of required documents in the latter (a copy of the invoice, copy of transport documents, certificate of non-payment , etc)
Let us now mention some of the characteristics of SBLC
They are a simple guarantee for the exporter to show to the importer commitment of compliance. The importer also commits to payment of the merchandise and reimbursement when something is flawed.
Flexibility. The contract will determine when the buyer has rights over the merchandise and when he or she is to be paid. The seller needs to show the appropriate documents to the buyer. Once it is cleared, the bank will honor the payment and it will be send to the exporter. This process allows facilitating the process of clearance.
Affordable. The responsibilities of the buyer in terms of payment are not high. The importer will pay only a commission for fright for as long as the SBLC is valid. Once the seller has proven that something went wrong, he or she will only pay for the confirmation of these documents. The level of risk of the country and the quality of the issuing bank are also considered.
It's a guarantee, not intended to be applied and it allow the coverage of successive expeditions if the terms of payment permit it.
For SBLC to be exercised, the exporter needs to show copies of invoices of transport, certificates of non-payment and others.
The SBLC is created with the intention of not using it. It is used as bank guarantee that compensates the exporter in case that the importer defaults payment of the merchandise. The SBLC are regulated and designed in compliance with the International Stand-By Rules And Practices or ISP98.
SBLC guarantee the exporter to receive payment for the merchandise if the importer does not comply with its responsibility. SBLC are attractive for exporters not only because of what was stated before but also because of its easy way to use and manage. However, it is mostly recommended for transactions between commercial partners that have already worked together in repeated occasions.
How to use it: If unpaid at maturity, the payment for the amount that the SBLC represents is immediately payable, subject to submission of required documents in the latter (a copy of the invoice, copy of transport documents, certificate of non-payment , etc)
Let us now mention some of the characteristics of SBLC
They are a simple guarantee for the exporter to show to the importer commitment of compliance. The importer also commits to payment of the merchandise and reimbursement when something is flawed.
Flexibility. The contract will determine when the buyer has rights over the merchandise and when he or she is to be paid. The seller needs to show the appropriate documents to the buyer. Once it is cleared, the bank will honor the payment and it will be send to the exporter. This process allows facilitating the process of clearance.
Affordable. The responsibilities of the buyer in terms of payment are not high. The importer will pay only a commission for fright for as long as the SBLC is valid. Once the seller has proven that something went wrong, he or she will only pay for the confirmation of these documents. The level of risk of the country and the quality of the issuing bank are also considered.
It's a guarantee, not intended to be applied and it allow the coverage of successive expeditions if the terms of payment permit it.
For SBLC to be exercised, the exporter needs to show copies of invoices of transport, certificates of non-payment and others.
About the Author:
Wade Henderson - recognized Professional - 15 yrs in the Business Finance Field - strong reputation for getting the deal done. IMMFinancial.com Letters of Credit Documentary Credit Get a totally unique version of this article from our article submission service
No comments:
Post a Comment