Establishing a new business connection is not easy. It is difficult to find a new buyer who is ready to make an advance payment to an untested exporter. By offering a letter of credit, the exporter can increase the chance of securing the order.

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BANDENIA
CHALLENGER FINANCE
Advantages of letter of credit

2. is an Elite innovative International Trade
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3. Advantages
of letter of
credit:

4. It simply
works:
In some situations, letter of credit works
when other payment options not.

5. It is a balanced
payment
option:
Importers and exporters could reach
reasonable payment terms via letter of
credit.

6. For Exporters:
Establishing a new business
connection is not easy. It is difficult to
find a new buyer who is ready to make
an advance payment to an untested
exporter. By offering a letter of credit,
the exporter can increase the chance
of securing the order.
Reach out New Customers:
Exporters can increase their export
coverage by regional means if they can
effectively use letters of credit. For
example, letter of credit is the main
payment option for majority of the
Middle East countries.
Increasing Export Coverage:

7. For Exporters:
By using a letter of credit, the exporter
can replace default risk from the
importer to the importer’s bank,
because the letter of credit is a
conditional payment undertaking of
the issuing bank.
Mitigates Default Risk of the
Importer:
By adding confirmation, the exporter
can eliminate importing country’s
political risks, at least in theory. For
further information please read our
post “Confirmation and Confirmed
Letter of Credit “.
Eliminates Importing Country’s
Political Risks via Confirmation:

8. For Exporters:
By using a letter of credit, the exporter
can replace default risk from the
importer to the importer’s bank,
because the letter of credit is a
conditional payment undertaking of
the issuing bank.
Mitigates Default Risk of the
Importer:
By adding confirmation, the exporter
can eliminate importing country’s
political risks, at least in theory. For
further information please read our
post “Confirmation and Confirmed
Letter of Credit “.
Eliminates Importing Country’s
Political Risks via Confirmation:

9. For Exporters:
It is possible to discount letters of
credit that do not payable at sight.
Once the issuing bank or confirming
banks determines that the letter of
credit documents are complying, the
respected bank can discount the
credit.
Discounting Possibilities:

10. For Importers:
By issuing a letter of credit from a
reputable bank, the importer proves
that he is a financially reputable
company.
Proof of Creditworthiness: More Favorable Payment Terms:
The importer may be able to convince the
exporter to work with a deferred payment
terms instead of an at sight payment via a
letter of credit. As the exporter can discount
the credit any time after the complying
presentation, deferred payment should not a
big issue for him. Most frequently used
deferred payment options under the letters of
credit are 30 days, 60 days or 90 days after the
bill of lading date.

11. Importers can determine the shipment
period by using a letter of credit. If the
exporter cannot shipped the goods on
time, he may face a late shipment
discrepancy.
Timely Shipments:
For Importers:

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United Arab Emirates.
www.bcf.ae

13. Thank You