Documentary trades
DOCUMENTARY LETTER OF CREDIT
This is an irrevocable written commitment by the buyer’s bank (letter of credit principal) to make a payment credited to the supplier (letter of credit beneficiary) by the deadline as stated in the letter of credit, providing the supplier presents the documents as established in the letter of credit and in accordance with the terms of the letter of credit . As such, it represents both a payment and security instrument.
IMPORT LETTER OF CREDIT
Are you a purchaser (customer/letter of credit principal) who is buying goods or ordering services from a seller (letter of credit beneficiary) with whom you are dealing for the first time? Or, is an import letter of credit generally a required payment condition in the seller’s country? There is no need to be concerned if your seller requires payment through a documentary letter of credit. For you, as a buyer, a letter of credit serves as security and you will be able to influence the range and contents of the documents against which the bank will then make a payment from your account.
EXPORT LETTER OF CREDIT
Are you an exporter (supplier/letter of credit beneficiary) and you are dealing with a customer (letter of credit principal) for the first time? Do you export to politically risky and unstable countries? We recommend you to use an export letter of credit that will provide you a payment commitment by your customer’s bank, subject to complying with the letter of credit terms and conditions. By doing so, you can eliminate, for example, risks of the customer’s insolvency or unwillingness to accept the goods and make subsequent payment(s).
In case the risk of the issuer bank (i.e. customer’s bank) is not transparent for you and you prefer to have your risk covered by another bank familiar to you, you should use a CONFIRMATION of the export letter of credit. Upon confirmation, the advising bank (i.e. supplier’s bank) shall jointly and severally join the issuer bank’s commitment. You are then secure – providing you comply with the letter of credit terms and conditions – that you have a commitment by your bank in the Czech Republic to get paid. In confirming letters of credit, our bank relies on an extensive international network of UniCredit Group correspondent banks.
LETTER OF CREDIT FORFAITING (i.e. non-recourse receivables purchase)
Do you have an export letter of credit with the payment date deferred for x weeks or months? Do you need cash right away or just want to “clean up” your balance sheet? In case that your letter of credit has been issued by a bank accepted by us, we will have no problem to purchase your L/C receivable without recourse.
LETTER OF CREDIT POST-FINANCING
Yet another financing option by means of a documentary letter of credit. You will obtain your money from a sight letter of credit while our bank will provide post-financing to the issuer bank. The fee for post-financing will be agreed in advance directly between us and the issuer bank and is debited to the issuing bank. The customer derives some benefit, too, since this method of financing is subject to less expensive rates in the inter-bank market. For you, the advantage consists in the absence of any contracts, as everything is agreed between the banks. A precondition, once again, is that the issuing bank must be on our accepted banks list.
DOCUMENTARY AND BILL COLLECTIONS
This is a less sophisticated method of documentary payments. The banks involved will enter into no payment commitments. Instead, their only task will be to issue documents to the supplier in exchange for a certain act (most often a payment collection or bill acceptance). We recommend using this product with firms with whom you have rather frequent trade activities and have already developed a certain level of mutual trust.
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