Letter of credit
The bank offers you an opportunity to use this way of payment in case if you do not know your business partner well enough or are not sure of his / her trustworthiness.
Using documentary credit, an exporter has a guarantee of the bank while making a payment; in order to do this, the exporter has to present a set of documents corresponding to the condition of the letter of credit in certain terms. From the point of view of the importer, a documentary credit represents an obligation to effectuate a payment in favor of a business partner if the latter presents a certain set of documents in stipulated terms.
To open a documentary credit, a customer has to present the following documents to the affiliation of the bank:
- Application of opening a letter of credit, containing the information corresponding to that in the commercial contract, which constitutes the essence of the transaction;
- A commercial contract (the original document and its copy).
A letter of credit may be open for the customer’s proper means or on the basis of a credit line.
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