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In other words the LC receiver ( Letter of Credit receiver / exporter) is looking for working capital to procure the ordered material and ship it out in time.
Most of the LC receivers always turn towards the financiers who ask then for high returns on the investment and finance provided. In the worse case they fall pray to fake funding personals or chain of brokers who waste their time and results in loosing the contract as well as money.
Best way is, always first approach to your bankers. The banks will certainly help you with capital provided for procuring the material against the orders and Letter of credit received, subjected you qualify their terms and condition.
You can appoint good consultants having proper knowledge for pre shipment finance or pre shipment bill or LC discounting. These consultants do their job in well manner position and with in time frame making the entire episode attractive and interesting.
Written by: Naik
Letter of Credit Discounting
Date published: 11/06/2015
Usance Letter of Credit [Usance LC] and possibilities for Discounting
Letter of credit is the most common method of
payment in business and into commonly practice by
seller and buyers.
Most of the
Buyers are interested in opening USANCE
LETTER OF CREDIT (Usance LC). Let’s first understand the Usance Letter of Credit.
USANCE LETTER OF CREDIT which is also known as Usance LC in short is letter of credit issued by purchaser or buyer to the seller or supplier who will get the draft for say 180 days sight, but after negotiating with
bankers can get the money at sight. On the other hand the purchaser / Buyer or importer who had opened the Usance LC will pay his bankers after 180 days.
If simple ordinary language, the
Usance LC receiver can negotiate and discount the Usance LC against the negotiable documents like invoices / BL / quality of certificate as mentioned in the contract under the clause ‘Documents required for
Payment’. The Usance LC receiver’s bank will, after getting the confirmation from the Usance LC issuing bank will release the payment to the Usance LC receiver and thus the Usance LC receiver will get the
payment at sight; off course the
payment will attract interest as per the banks standard terms.
The terms “Usance” means the tenor for which the Letter of Credit is issued and the
Bill of Exchange to be drawn by the beneficiary on and duly accepted by the name drawee. The payment will be made at sight when the
Usance LC clearly indicates that the Usance bills drawn are to be negotiated at sight.
The
Usance LC with above terms can be discounted and the exporter / supplier / seller can get the payment at sight.
Funds against Stand By Letter Of Credit | SBLC
Loan and finance available against Stand by Letter of Credit for working and pre shipment
Funds can be generated by beneficiary against Stand By Letter of credit. These funds can be availed from advising banks or third party, to utilize for pre-shipment procedure. Most of the beneficiary always requires funds to complete the contract against which the SBLC is issued to them. For this, borrower can contact their banks or private finance institute and get their loan sanctioned against the SBLC. The Stand by letter of credit should be issued through proper channel. Financial institutes and banks are interested in clean SBLC with proper documentation, and helps the beneficiary or the borrower.
SBLC issued from prime banks are most honoured and borrower get funding easily.Due Diligence is always required for raising funds against SBLC
The most import thing in business is finance, which everyone is looking for and few are able to achieve it. And who achieve and able to manage makes name and fame around the globe.
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The common practice in business in terms of sale and purchase, where the volume is high either of the commodity or the funds, the buyer or importer is always feel safe by issuing the letter of credit. The supplier or the trader on the other hand is not able to deny since they don’t want to lose the business.
Now comes the important part, once the letter of credit is issued after certain documentations and approval of prices, the traders or the exporter starts locating a suitable financier who can provide him / his company funds to procure the cargo / material to be supplied as per the instructions in the letter of credit.
Before proceeding to the financier or arranging for finance to honor the letter of credit, do check whether the letter of credit is a USANCE or AT SIGHT.
As a suitable and powerful financier, the banks are the best one. They extend support as per the requirement of their client once the client compiles with their terms and conditions, in order to make the bank comfortable to finance the client.
But in most of cases, the terms and conditions set by the banks are not able met, and then we have to use the second secured channel. Get the bank feel secured by providing the bank with collateral security. The banks will provide you either with Over Drafting facility or Credit Limit depending on the value of collateral security you are providing to the bank. This OD or CC limits can be utilized by the supplier to fund their pre-shipment procedure and after getting the remittance, can repay the bankers.
In my other post I will inform about options to get funds other than the banks.
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