Letter of Credit – Boost to Secure Your International Trade!!!

1. Letter of Credit – Boost to Secure Your International Trade!!! International trade is growing at a fast pace and the parties involved face difficulties due to each country having different customs rules, different languages, and inability to know each other personally. Thus, it becomes difficult to decide about one’s credibility. In this situation, it becomes very important to have some means that give security to both the parties (buyer and seller). Here comes into picture letter of credits which acts as a security tool. Commercial Letter of Credit– A Commercial Letter of Credit is a legal document or instrument created on behalf of the customer by a bank or a financial institution, that promises to make the payment to the beneficiary if the beneficiary fulfils his obligation. It provides the security and guarantee of the payment to sellers from the bank. In case, the buyer fails to make the payment, the bank will pay the full or remaining amount of purchase to the seller. There are many uses of a Commercial Letter of Credit. To begin with, it eases international trade. It provides surety to the seller about the payment risk of the buyer around the world and thus builds confidence, trust, and relationship. An importer should be capable and able to convince the bank about his capability so that the bank issues the credit to the seller. In addition, a Commercial Letter of Credit helps in increasing the liquidity of the importer as the bank takes over the responsibility of the buyer. With the help of this, the buyer can enter the transactions more than the expected limit given the size of its business. It also helps the seller in the worst-case scenario where the importer might become bankrupt. Standby Letter Of Credit– Standby Letter of Credit is a secondary payment tool that provides a guarantee to the beneficiary that the payment will be made by the creditworthy bank if it is not able to get the payment from

2. the counterparty involved in the transaction. It is issued by a bank to assure the seller that the buyer can make the payment by the terms of the agreement. In case the buyer is not able to meet the obligation, the seller can use the Standby Letter Of Credit as a shred of evidence and withdraw credit. SLOC helps to strengthen the creditworthiness of the buyer. Mostly, it is not used if the buyer paces the payment according to the seller. Standby Letter of Credit acts as a safety valve ensuring the payment for the goods being purchased. In conclusion, Standby Letters of Credit and Commercial Letters of Credit are instruments that are used to secure international trade. For more information visit our website: https://merchantcreditcorp.co/ Merchant Credit and Guarantee Corporation Limited (MCG) SOURCE LINK:https://bit.ly/3mCL6BE ADDRESS: 32 Maranui Ave, EPSOM, Auckland 1051, New Zealand PHONE: +64 9 5244269 EMAIL: info@merchantcreditcorp.co WEBSITE: https://merchantcreditcorp.co/