A letter of credit is a payment method in international commercial relations which is developed to minimize the concerns of the parties such as collection of the value of the shipped goods of an exporter and shipment of the goods for which an importer pays or will pay. In short, it is a “conditional bank commitment”.
A letter of credit is the written commitment of a bank (issuing bank) acting as per the demand and instructions of the buyer (applicant) that it will pay to the seller (beneficiary) immediately or within a specified period of time up to a certain amount of money with the condition that the documents required for the letter of credit are presented and that conditions foreseen for the letter of credit are fulfilled.
Solely the transaction of opening a letter of credit is a non-cash financing and it is considered as a cash financing when the value of the goods subject to the letter of credit is paid, or in other words financed by our Bank.
Thus, the importer will be sure to receive the good as per the quality and the condition demanded and the seller will be sure to receive the cost of the good on time.
Fixing the payment risks at an acceptable level for the exporter and the importer by the payment against documents commitment of the Issuing Bank and if any, the Confirming Bank.
Who can take advantage of this product?
All our exporting and importing clients.
The term is determined freely by the exporter and the importer.
- The Seller and the Buyer obtain financing facility.
- It protects both the importer and the exporter; the exporter is assured to receive the amount of the good once the goods are shipped according to the conditions of the letter of credit and the importer knows that no payment will be done prior to exporter’s submission of the documents to the bank proving that the shipment is done and the good is shipped as per the conditions of the letter of credit.
- Both parties have the guarantee of an additional bank payment for the confirmed letter of credits of a bank.
- The commercial risks for the buyer and the seller and the political risk in the country of the buyer are minimized due to the guarantee.
- Parties have the opportunity to find new markets.
How can I apply?
You can apply by visiting the nearest Ziraat Participation Branch.