- Letter of Credit
Letter of Credit (L/C) is one of the safest financial instruments available for an Exporter to ensure that they will get their payment(s) of a particular amount & in a specific currency within the specified time period. The Importer is also sure of the Exporter’s reliability to supply their required commodities, its quality, quantity and shipping, etc. as per the agreed terms between them.
The Letter of Credit is also known as ‘Documentary Letter of Credit’, ‘Import Letter of Credit’ or ‘Commercial Letter of Credit’. It is a written undertaking given by a bank (LC Provider) to the seller/exporter and a technique for financing International trade by which a buyer’s bank provides the irrevocable commitment, at the request and for the account of its client/importer to pay …. Read More
- Standby Letter of Credit
Standby Letter of Credit or SBLC (MT-760) is a written obligation of an issuing bank as a Standby LC provider bank to pay a specified amount of money on their client’s behalf and in favor of a beneficiary in the event that the client/buyer is unable to complete their financial obligation to the seller/beneficiary.
Standby LC is a sign of good faith in commercial transactions and is proof of a buyer’s financial credibility and repayment abilities.
Standby LC is commonly used in commodity business, like to acquire merchandise from a local supplier or international exporter. SBLC can also serve as a security to avail credit lines and is ideal for business organization that plans to expand their business and does not want to utilize their assets. Standby LC is always issued …. Read More
- Bank Guarantee
Bank Guarantee (MT- 760) is a written undertaking by the bank as a provider in favor of the beneficiary at the request of the bank’s client who has an existing contract with a particular seller/exporter to procure several commodities and has pledged to fulfill all their financial commitment to the seller/exporter in case of default.
A Bank Guarantee enables companies to make purchases that they would otherwise not be able to make, acquire goods, equipment, commodities, draw down loans, and secure contracts or leasing arrangement without tying up their working capital and thereby expand business activity. A Bank Guarantee may be utilized to pay an agreed-upon sum to the seller when purchaser/importer acquires goods from a seller/exporter that may be experiencing …. Read More
- Performance Guarantee Bond
Performance Guarantee Bond is a financial tool that acts as a security to guarantee any claim of the importer/buyer towards the exporter/supplier if and when a default occurs in performance of delivering huge merchandise/commodities in accordance with the sales & purchase agreement. As well, Performance Bond/Guarantee is a surety bond issued by a bank or insurance company to guarantee acceptable or satisfactory conclusion of a certain project development by a contractor. The Performance Guarantee or Performance Bond will require having tangible collateral in terms of property or termed deposit to back up the requirements of the issuing bank (provider bank) or Surety Company.
It is normally used in development or …. Read More
- Advance Payment Guarantee
Advance Payment Guarantee, which is issued by a particular provider bank, is a form of security for recovery of the payment made in advance by a buyer/developer under a contract or purchase order if the supplier fails to fulfill its contractual obligations, unable to comply with the terms & conditions which govern the procurement of a specific merchandise or service or fall short in supplying the goods/merchandise specified on their sales & purchase agreement.
It can be utilized in various situations, mostly in import & export trade deals. The APG can also be used in domestic business deals, for example; procurement of heavy machineries/equipments or huge quantity of commodities and construction projects. Advance Payment Guarantee allows the exporter/supplier to …. Read More
- Tender Bond Guarantee
A Tender Bond is also known as Bid Bond or Tender Guarantee. This is an undertaking issued by a provider bank for its client to bid a tender in favor of buyer/developer to secure financial risk in case if the successful bidder fails to enter into the contract. In general, when bidding for an export contract, the potential buyer may require the supplier/exporter to provide a tender bond along with their tender submission.
If and when a supplier is awarded the tender but fails to formalize the export contract or doesn’t issue supplementary guarantees (usually a performance bond) to the buyer when required, then the buyer has the right to call the tender bond which means that they may demand payment of the bond amount from …. Read More
- Bank Comfort Letter
Bank Comfort Letter BCL (MT-799) also known as Bank Capability Letter, is a letter issued by a bank (provider bank) on behalf of their client /buyer who come into a contract to procure huge quantity of goods/merchandise from a seller confirming their financial ability to fulfill their commitment as per the agreed contract terms & conditions. It also shows that the buyer has sufficient funds or financially capable to complete the business deal. However, it should be clear that the Bank Comfort Letter does not mean any assurance of payment.
If a buyer is claiming that they’re capable financially to purchase a product through their bank by providing this notification via authenticated swift message MT-799, they are indirectly claiming that they have enough cash or the …. Read More
Succes Stories :
A Ghana-based company dealing in the building construction material was awarded a contract for the supply of huge bulk of cement to a client located in Liberia. However, the buyer company wanted the whole quantity on urgent basis.
So the Liberian buyer asked the suppliers to provide them a Performance Bond at two percent (2%) of the contract value against the Letter of Credit. Since the Ghana company was so sure of getting the big order of cement, they decided to obtain a Performance Bond against the Letter of Credit.
However, finding the right firm that issues Performance Bond was not that easy as they thought. Their application for PB to some banks was turned down. The Ghana company then desperately searched for some private companies which could furnish such guarantee but require a heap of papers to be submitted. Some companies even had a very lengthy and complicated procedure, while others had an awfully lengthy approval period.
Fortunately, while checking their e-m…