Advantages of letter of credit

Answer 1

Advantages of Using Letters of Credit · For Exporters · Guaranteed payment upon presentation of the documents specified in the terms of the letter of credit. · Reducing the production risk, first of all, for the situations when the buyer cancels or changes his order. · The ability to structure the delivery schedule according to the exporter's interests. · The chance to obtain financing for production or purchase of goods (pre-export finance). · The chance to get financing in the period between the shipment of the goods and receipt of payment (especially, in case of delayed payment). · The buyer cannot refuse to pay due to a complaint about the goods. · The importer must raise any complaints/claims about the delivered goods separately from the letter of credit, which provides the exporter with a significant advantage in resolving such issues. Using documentary letters of credit allows the exporter to significantly reduce the risk of non-payment for delivered goods, as in case of presentation of fully credit conform documents by the seller, the issuing bank pays the agreed-upon amount independently of the importer. In order to use Aizkraukles Banka services to accept documentary letters of credit as a form of payment, you just need to have a current account with the bank. For Importers · The possibility to structure the payment plan in the contract according to the importer's interests. · Certainty that the payment will be made only upon presentation of the documents confirming shipment of the goods. · The use of a letter of credit allows the importer to avoid or reduce pre-payment. · The seller must fulfill all terms of the contract, as indicated in the letter of credit (shipment of the goods, meeting delivery terms on stock, amount, and deadlines) in order to receive the payment. · Having opened a letter of credit, the importer proves his ability to pay and can count on more favourable payment terms in the future. Documentary letters of credit help the importer significantly reduce the risk connected with the seller not meeting its delivery obligations. The imported goods will be delivered in accordance with all the conditions specified in the letter of credit, and the agreed-upon documents will be received relatively quickly. Advantages of Using Letters of Credit · For Exporters · Guaranteed payment upon presentation of the documents specified in the terms of the letter of credit. · Reducing the production risk, first of all, for the situations when the buyer cancels or changes his order. · The ability to structure the delivery schedule according to the exporter's interests. · The chance to obtain financing for production or purchase of goods (pre-export finance). · The chance to get financing in the period between the shipment of the goods and receipt of payment (especially, in case of delayed payment). · The buyer cannot refuse to pay due to a complaint about the goods. · The importer must raise any complaints/claims about the delivered goods separately from the letter of credit, which provides the exporter with a significant advantage in resolving such issues. Using documentary letters of credit allows the exporter to significantly reduce the risk of non-payment for delivered goods, as in case of presentation of fully credit conform documents by the seller, the issuing bank pays the agreed-upon amount independently of the importer. In order to use Aizkraukles Banka services to accept documentary letters of credit as a form of payment, you just need to have a current account with the bank. For Importers · The possibility to structure the payment plan in the contract according to the importer's interests. · Certainty that the payment will be made only upon presentation of the documents confirming shipment of the goods. · The use of a letter of credit allows the importer to avoid or reduce pre-payment. · The seller must fulfill all terms of the contract, as indicated in the letter of credit (shipment of the goods, meeting delivery terms on stock, amount, and deadlines) in order to receive the payment. · Having opened a letter of credit, the importer proves his ability to pay and can count on more favourable payment terms in the future. Documentary letters of credit help the importer significantly reduce the risk connected with the seller not meeting its delivery obligations. The imported goods will be delivered in accordance with all the conditions specified in the letter of credit, and the agreed-upon documents will be received relatively quickly.