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Letter of Credit Benefits

Letter of Credit Benefits to Your Company (the Buyer)

• No cash is tied up in the process.  The buyer does not have to pay cash up front to a foreign seller before receiving the documents of title to the goods purchased.

• The buyer can build safeguards into the letter of credit, including inspection of the goods and quality control, and set production and delivery times.

• Maximizes control of documents for customs clearance.

• Increases your competitiveness in foreign markets.

• Creates efficiencies and protection from loss.

• Expands your company’s business opportunities.

• Minimizes risk, maximizes control, and optimizes profits associated with international trade.                                                                                                           

Letter of Credit Benefits to the Seller (the Beneficiary)

• The Beneficiary is assured of payment as long as it complies with the terms and conditions of the letter of credit.

• The credit risk is transferred from the Buyer to the Issuing Bank (i.e. it is obligated to pay even if the Buyer goes bankrupt).

• Provides the Seller easier access to financing once the letter of credit has been issued.

• Allows the Seller to transfer partial or full value of the letter of credit to other parties (e.g., to purchase raw material).

• The Beneficiary minimizes collection time as the letter of credit accelerates payment of the receivables.

• The Beneficiary’s foreign exchange risk is eliminated with a letter of credit issued in the currency of the Beneficiary’s country.

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