Letter of Credit
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Prime Enterprise FZ LLC
What is Letter of Credit?
Due to the nature of global trade dealings & its risks factors including distance, different laws in each country, and trust issues between the traders, the use of Letter of Credit has become a vital part of global trade. When a buyer & a seller from two different parts of the world decided to do business, there might be uncertainty in trust and payment will arise. To bridge the gap between the traders & to build trust, Letters of Credit are being used.
Usually, Import LC & LC at Sight which is valid for 90 days and 180 days is always irrevocable. It means a bank provides an irrevocable commitment to the seller, that they will get paid if they comply with the terms stated in the issued Irrevocable Letter of Credit. Also, it assures that if the buyer is unable to make the payment or went bankrupt, then the bank will be liable to fulfill the payment terms as agreed in the contract. Hence this is an irrevocable commitment made by the bank, Letters of Credit are mostly preferred by buyers and sellers, as an
How Does a Letter of Credit Work?
When it comes to global trade, buyers run the risk of not receiving goods from the seller for which they have already paid. On the other hand, sellers run the risk of nonpayment by the buyer for the supplied goods. Hence, in this case, the traditional payment method used earlier for global trade has failed. So, the International Chamber of Commerce (ICC) introduced
While using LC Payment Term, the buyer’s bank assures to pay the seller for the supplied goods; upon complying with all terms & the submission of documents as stated in the issued Letter of Credit. In case, if the seller fails to submit the documents before the deadline, the LC will be expired. Then the bank will return the funds to the buyer’s bank account which they deposited while LC Opening. Hence, this way, the risk of default in the payment & the delivery of goods goes down to zero percent.
Documents required for a Letter of Credit
Are you looking for a solution to conclude your import/export deals or perform construction or real estate projects? We are here to support your needs by offering
- Signed Copy of Proforma Invoice or Sales and Purchase Contract of your Trade Deal
- Company Registration or Trade License
- Passport Copy of the Authorized Signatory
- MOU between partners (if any) along with Company Ownership Document
- Passport Copy of the Authorized Signatory
- Authorized Signatory’s Residence or Company Utility Bills as Address Proof
- Past 6 Month Bank Account Statement Copy
Once all these documents are received from your end, you can contact us with your LC request. And we will start work with our bank to structure your Letter of Credit transaction.
