A letter of credit is a very important tool for facilitating global trade. It advantages both the exporters and importers. An import letter of credit improves the credit value of the importer while an export letter of credit alleviates the credit risk for the exporter and helps perk up his cash flow. Here, we will be talking about Export Letter of Credit. So, let’s gather some important knowledge regarding it.
What is EXPORT LETTER OF CREDIT?
An importer issues an import letter of credit with the exporter being the recipient. The same letter of credit, when received by the exporter’s bank or non-bank financial company becomes an export letter of credit. So, both the export and import letters of credit are greatly the same, it’s just the viewpoint which is different.
The exporter requires fulfilling the terms and conditions and giving in the necessary documents as stated in the letter of credit before he can be given payment.
What are the BENEFITS OF EXPORT LETTER OF CREDIT?
One of the most excellent methods after the advance mode of payment for any business the transaction is Letter of Credit (LC) mode, as purchaser’s bank or non-bank financial company guarantees payment to the supplier through seller’s bank on presentation of necessary documents as per LC.
The major benefit of Letter of credit to a supplier is, it decreases the credit risk as the issuing bank or non-bank financial company is legally responsible to pay even if the importer fails to pays. Export letter of credit can be modified to the requirements of the exporter, therefore it offers flexibility in terms and conditions so long as they are fair and lawfully binding.
In an export and import business, the geographical distance between importer and exporter is very distant; therefore determining credit worthiness of purchaser is a major risk. In a mode of Letter of credit, such risk can be evaded.
Purchaser cannot refuse payment by raising dispute on the quality of supplies, as letter of credit terms and conditions are rooted in certification. This is a major benefit of the Letter of Credit in terms of supplier’s standpoint. Some of the fake purchasers intentionally holds-up or delays payments by complaining about the quality of supplies.
Which non-bank financial company can help you in getting export letter credit?
“Merchant Credit and Guarantee Corporation Limited (MCGCL)” is a reputed non-bank financial company that can provide you with Export letter of credit. They are working as a non-bank financial company in this industry for years. Know about this company more by visiting their website- merchantcreditcorp.co. Also, read other online articles for gaining more knowledge on this context.
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