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Letters of credit

Letters of credit is one of those terms many people have heard of but do not necessarily what it means. If you export goods then letters of credit can be essential to your business. This article from Open to Export explains all about letters of credit http://bit.ly/1NyGlOG .

A letter of credit is essentially a bank’s promise to another bank, that they know you and will act as a guarantor for your transaction. You need both banks to be involved in the transaction and to agree to act in this way.

Once it is agreed, in the event that your buyer is unable to make payment, the bank will cover and pay the outstanding amount, provided that certain delivery conditions have been met.

For letters of credit to be valid documents must:
– be presented within specified time limits
– be in strict accordance with the terms and conditions set out in the letter of credit
– be presented at a specified place

The Open to Export article covers the following:

– Why might I use or need a letter of credit?
– What are the advantages of a letter of credit?
– Your responsibilities under a letter of credit
– What could go wrong?
– Letter of credit checklist
– What about the costs?
– How do I proceed?
– What if I might need to amend my letter of credit?
– Some final thoughts