Import letters of credit are a recommended solution if your business is buying from overseas and you want to be sure you'll receive the goods before you pay.
Similarly, Export letters of credit are beneficial if you are selling and you want to ensure payment for your goods – especially if you are dealing with a new market, country or trading partner.
How they work
Any business exporting its goods wants confidence that they will receive payment. Consequently, if you are buying goods from a company overseas, they may ask you for an Import letter of credit.
An Import letter of credit is a commitment given by your bank to pay your supplier on your behalf using a credit facility that you have pre-agreed. Payment is only made if your bank receives specified documents about the transaction from your supplier. The Import letter of credit sets out the documents to be provided and the conditions to be met.
This means that the goods you buy will be as ordered, and that they will be delivered at the agreed time and place. Your supplier can be equally confident that they will be paid by your bank.
Safe and effective – letters of credit are normally legally binding and cannot be cancelled unless all parties agree
Peace of mind – the exporter must ensure that all goods sent to you are as agreed; if not, they run the risk of non-payment
Reduces financial risk – payment is only made if the exporter fulfils the terms of the letter of credit
New market penetration – letters of credit play a key role in international trade, allowing you to trade safely in unfamiliar markets
Negotiating power – because we, your bank, guarantee payment to the exporter, you may be able to secure a better price for the goods
Enhanced credit position – you may be able to access Funding solutions to improve cash flow
Safe and efficient – you can raise letters of credit electronically using MaxTrad, our online trade banking service
To apply, download the Letter of credit application form (PDF, 167KB) and return it to your Relationship Manager.
Application subject to customer credit line facilities.
How they work
With export letters of credit you can export goods safe in the knowledge that you will receive payment. This is because Export letters of credit provide a commitment given by the buyer's bank to you that they will pay on behalf of their client. For a transaction to be successful, shipping documents must be presented according to conditions pre-agreed with your buyer.
You will need to ask your buyer to set up a letter of credit via their bank. We can help you do this. We can also talk to you about the best terms to be agreed upon between you and your buyer.
The terms under which payment will be made are known in advance of shipment: timescales, despatch dates and other arrangements are agreed between buyer and seller and are built into the Export letter of credit documentation.
Confirmation from your buyer's bank that it will pay you for your goods on behalf of its client may not be enough for your peace of mind. We can also guarantee payment if your buyers bank defaults, this is known as a confirmed letter of credit.
Transferable Letters of Credit can enable the exporter to source goods that they are not directly manufacturing, by being able to "transfer" payment (in full or in part) to the manufacturer.
Safe – Export letters of credit allow you to trade in markets where other types of payment could be risky.
Flexible – we can personalise your letters of credit to meet your exact business needs.
Peace of mind – payment will be made according to the terms of the letter of credit.
Lower production risks – you can be confident that you will be paid for the goods after shipment to the buyer.
Financial security – provides extra security so you can arrange pre-export financing.
Improved cash flow – deferred payment letters of credit can be financed with your bank using our Funding solutions to improve cash flow.
Secure and efficient – you can manage your letters of credit and amendments using MaxTrad, our online trade channel.
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