Letters of Credit is a written undertaking which is given by a bank to the seller (beneficiary). Issuing bank provides irrevocable commitment at the request and for the account of its client (applicant) to pay exporter (beneficiary). After the handing-over of various documents complying with the terms of the credit. As well, proving the nature of goods specified in the pro-forma invoice or commercial contract within a set time limit.
The beneficiary of MT 700 may also obtain from their bank a packing credit or borrow funds to mobilize their exports. Upon completion of the export of goods towards the buyer company. The beneficiary (Seller) will settle the advance funding by the proceeds of the supplied goods to their bank.
In general, there are three parties involve with letters of credit. First, it’s the beneficiary, the company who will receive the payment. Second, it’s the applicant or buyer who needs those goods and services. And third, the financial institute that will issue the LC – MT700. This is much like a financial institute who finance the transaction until the beneficiary receives full payment.
Not just the exporter, but the importer has also lots of benefits resulting from using letters of credit for their international trade.
Credit advantages for Exporter
• The buyer can’t cancel or alter an order without the approval of seller. Hence, the production risk becomes zero.
• The buyer’s bank has the obligation to pay for the shipped goods.
• The buyer can’t refuse to pay for the supplied goods. Once the seller complies with the terms of credit.
• The payments are also secured if the buyer is given a choice of deferred payments.
Credit advantages for Importer
• The bank is liable for the payment of goods or services on a precondition. If the seller would provide all the documents required according to the terms of LC – MT 700.
• The buyer through an LC is indeed proving their solvency.
• In most cases, the buyer can control the shipping of goods.
• If the seller provides an option for deferred payments. It simply means that the seller has granted a credit period to the buyer.
• Prepayments become negligible with import LC.
We can assist you in your trade deal by providing Irrevocable Letter of Credit (LC- MT700) on behalf of the buyer & in favour of the seller to conclude your imports & exports.
Below are the simple steps to avail LC or DLC from us:
1. Client submits their LC or DLC request to Helios Investment Company in terms of Signed Copy of Pro-Forma Invoice Or Sales & Purchase Agreement of their Trade deal and informs the Face Value & Validity of their required LC or DLC.
2. HELIOS carries due diligence of their trade transaction and after its assessment informs the client about approval or rejection of their LC or DLC application.
3. Once the LC application is approved, we will draft a service agreement between client & HELIOS. Also, inform the client about the admin charges to begin the client’s LC or DLC transaction.
4. After both parties sign the service agreement and HELIOS received the admin charges. We will start work on client’s transaction of LC or DLC.
5. Once HELIOS has received the requested documents, approvals and the LC issuance fee charges. We will instantly request our bank for issuance of the required LC. It will not take more than 2 banking days to conclude the LC or DLC transaction.
Use the link here to view brochure.
Letter of Credit requires a credit decision so, contact the support team via our email or inquiry form; to obtain full procedure and application.