When your business grown to the point of being able to export and import goods or other supplies required for insertion into a useful tool: the letter of credit, also known as SBLC.
The letter of credit or SBLC is the bank’s irrevocable undertaking to compensate the beneficiaries in case of default by the debtor. SBLC are designed according to what the International Stand-By establishing standards and practices or ISP98.
The SBLC is a bank guarantee that is used by exporters to ensure the execution of a contract. It is easy to implement and manage, and is a guarantee that can be adapted to use for specific operations or transactions with trading partners that are known and common.
When SBLC has passed its expiry date, which may be charged immediately by the owner. The exporter will have to show documentation showing that the transaction was different from what is established in the letter (a copy of the invoice, a transport certificate of non-payment, etc)
We will mention some of the characteristics of SBLC
It’s simple, the seller guarantees that its own commitments, and credibility to the buyer.
SBLC are also flexible because the exporter and the importer does not need so much paperwork in order to show their commitment. The exporter will be displayed to the buyer the documentation that shows the transaction did not meet the established, and once everything is cleared from the transfer of money will.
It is cheap: The importer will only pay the commission to issue a scare over the risks during the life of the SBLC. The seller, if the SBLC to be confirmed, only pay for the confirmation that the fee is fixed in terms of country risk and the quality of the issuing bank.
Risk-free. Gives peace of mind to those who use it because it will act as a guarantee in case something goes wrong. That allows the exporter and importer for successive trips to resolve the situation.
SBLC to be exercised, the exporter must show copies of invoices for transportation, licenses and other non-payment.