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Letters of credit


Letters of credit

Trade with confidence and minimise financial risk: letters of credit

We help thousands of businesses with their international trading needs every day. Letters of Credit are among the most secure methods of settlement, and are internationally recognised. Import Letters of Credit are a recommended solution if your business is buying from overseas and you want to be sure you'll receive the goods before you pay. Similarly, Export Letters of Credit are beneficial if you are selling and you want to ensure payment for your goods - especially if you are dealing with a new market, country or trading partner.



How they work

Any business exporting its goods wants confidence that they will receive payment. Consequently, if you are buying goods from a company overseas, they may ask you for an Import Letter of Credit.

An Import Letter of Credit is a commitment given by your bank to pay your supplier on your behalf using a credit facility that you have pre-agreed. Payment is only made if your bank receives specified documents about the transaction from your supplier. The Import Letter of Credit sets out the documents to be provided and the conditions to be met.

This means that the goods you buy will be as ordered, and that they will be delivered at the agreed time and place. Your supplier can be equally confident that they will be paid by your bank.

Key benefits

Safe and effective - Letters of Credit are normally legally binding and cannot be cancelled unless all parties agree

Peace of mind - the exporter must ensure that all goods sent to you are as agreed; if not, they run the risk of non-payment

Reduces financial risk - payment is only made if the exporter fulfils the terms of the Letter of Credit

New market penetration - Letters of Credit play a key role in international trade, allowing you to trade safely in unfamiliar markets

Negotiating power - because we, your bank, guarantee payment to the exporter, you may be able to secure a better price for the goods

Enhanced credit position - you may be able to access Funding solutions to improve cash flow

Safe and efficient - you can raise Letters of Credit electronically using MaxTrad, our online trade banking service

To apply, download the Letter of credit application form (PDF, 1.5MB) and return it to your Relationship Manager.
Application subject to customer credit line facilities.

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If you haven't found what you're looking for or have any additional questions please call us using the 'Get in touch' contact information.

How they work

With export letters of credit you can export goods safe in the knowledge that you will receive payment. This is because Export Letters of Credit provide a commitment given by the buyer's bank to you that they will pay on behalf of their client. For a transaction to be successful, shipping documents must be presented according to conditions pre-agreed with your buyer.

You will need to ask your buyer to set up a Letter of Credit via their bank. We can help you do this. We can also talk to you about the best terms to be agreed upon between you and your buyer.

The terms under which payment will be made are known in advance of shipment: timescales, despatch dates and other arrangements are agreed between buyer and seller and are built into the Export Letter of Credit documentation.

Further protection

Confirmation from your buyer's bank that it will pay you for your goods on behalf of its client may not be enough for your peace of mind. We can also guarantee payment if your buyers bank defaults, this is known as a confirmed letter of credit.

Flexibility

Transferable Letters of Credit can enable the exporter to source goods that they are not directly manufacturing, by being able to "transfer" payment (in full or in part) to the manufacturer.

Key benefits

Safe - Export Letters of Credit allow you to trade in markets where other types of payment could be risky

Flexible - we can personalise your Letters of Credit to meet your exact business needs

Peace of mind - payment will be made according to the terms of the Letter of Credit

Lower production risks - you can be confident that you will be paid for the goods after shipment to the buyer

Financial security - provides extra security so you can arrange pre-shipment financing

Improved cash flow - deferred payment letters of credit can frequently be financed with your bank Funding solutions to improve cash flow

Secure and efficient - you can manage your Letters of Credit and amendments using MaxTrad, our online trade channel

If you haven't found what you're looking for or have any additional questions please call us using the 'Get in touch' contact information.