What is letter of credit finance? How is it obtained? What is the advantage of having it? All these queries are the main reason for you to login to your system and then start finding the relevant information from various sites. This article helps you know about the basic information of what contains the so-called letter of credit. Letter of credit does not come easily. It has three characters that should play well to create the movie of credit into a success.
The first and foremost character is the originator who starts with starting the process of writing the content of the letter. The main purpose of letter of credit would be to act as a bridge between the exporter and importer for the purpose of transaction. In addition, it would function as a bridge between importer and banks. How is this initiated as such? The importer approaches the bank from where he wants letter of credit finance to be generated in order to show it to the exporter on which you can find the T & C which when expanded is the applicable terms and conditions subject to which the agreement is done.
For a bank to lend you, the requested amount you should have a minimum of one financial institution that has participated in your letter of credit with a positive response on your credit details. The banks tend to play a very major role in not only giving over the credit letter but also to assess whether the exported has followed the so mentioned terms and conditions and hence will show off a green signal to proceed to pay.
Seller who is otherwise called here as exporter, is the second character that has got importance in this credit letter process. The exporter is the individual person or unit who is favor of authorizing letter of credit. The person who is under the beneficiary side will have the complete right to claim against letter of credit finance and request payment by submitting the relevant documents in due time.
The bankers who give the credit letter to the beneficiary does so on the order received from the importer. It responsibility and also let both the parties know that the payer has to notify seller that the payment has to happen through their bank. This is the complete understanding of the process involved in the credit letter that is useful for the all the two parts at the edge transacting and the transaction handling system which is the bank to agree on the terms.