Letters of Credit

Key Benefits

To the Importer

*Able to control terms and reduce risk
*Can predict cash flow and price goods accurately
*Can negotiate for better terms
*Can obtain extended credit by having tenor LCs

To the Exporter

*Payment assured without affecting own bank limits
*Enhanced competitiveness
*Predicted cash flow
*Exporter may save costs of other credit insurance
*Access to local help and advice
*Country risk eliminated by an accepting bank in exporter's country

Important Features
*LC issued by importer's bank
*Credit terms and currency of payment may be negotiated
*Credit may be confirmed by a bank in the exporter's country
*Known payment date and revenue
*LC can provide for payment at sight or tenor (deferred payment, say 30, 60, 90 or more)
*Customer instructs own bank to issue LC and also to specify terms
*Credit terms, price and currency of payment may be negotiable