How LCs from Euro Exim Bank Help SMEs in Emerging Markets
At Euro Exim Bank, we are helping to reduce the friction between transacting parties while providing favourable conditions for small and medium enterprises in emerging markets to access the global market place. One of the most important tools we provide our customers with are Letters of Credit (LCs) with favourable terms and conditions.
What is an LC?
A letter of credit or LC is a payment mechanism that is used for international trade settlements. The main benefit of an LC is that a creditworthy bank (i.e Euro Exim Bank) is able to provide an economic guarantee to the exporter of goods. This arrangement is highly suitable in instances where exporters and importers may not know each other well enough.
The bank then effectively becomes the underwriter for the transaction and assumes the credit risk of the buyer paying the seller for the goods, whilst also ensuring that the seller fulfils their part of the transaction in full. Thus, both parties enjoy protection for their own interests.
Why an LC from Euro Exim Bank
Letters of Credit provided by Euro Exim Bank are unique in that the Bank remains the consignee and owner of the goods until formal and approved presentation. This arrangement allows us to typically NOT require that buyers place a 100% deposit of the face value of the transaction, as is usually the case, for a period of up to one year.
The requirement for a 100% deposit of the value of the transaction is a huge hurdle for SMEs and new entrants to the market. Thus, by providing our customers with the flexibility to negotiate favourable payment terms for international trade deals, we are able to increase accessibility for smaller players in emerging markets.
First Drafts within 3 Working Days & Other Benefits
In addition to the primary benefit of increased flexibility, Euro Exim Bank’s processes have been thoroughly streamlined so that we are able to provide a first draft for an LC within 3 working days of receiving the necessary preliminary information, such as a sales or pro forma invoice.
Once both the contracting parties have agreed to proceed and we have received all the necessary documentation, we will then go ahead with due diligence and the creation of the necessary documents. Our processes have been engineered to be able to provide the final letter of credit within 5 working days of receiving all documentation and required payments.
For more information about the documents required for an LC please contact us via email@example.com .
Types of LCs Issued by Euro Exim Bank
There are different kinds of LCs that we issue and they are suited for various and or specific purposes. An LC from Euro Exim Bank could be one or more of the following:
Irrevocable – The conditions of such a letter of credit cannot be changed or amended by the buyer or the bank without the express consent of the seller.
At Sight: This kind of LC allows for the seller to be immediately paid by the underwriting bank upon the submission of the required carriage documents by the seller.
Stand By: LCs drawn up as “Stand By” are used as a security and are usually not intended to be the actual method of payment. They can be issued and then used as a “stand-by” in the event the buyer fails to make the payment.
Transferrable: This is useful if the seller wishes to transfer some or all of the credit to another 3rd party who may be a supplier or other service provider.
Confirmed: An LC is said to be confirmed when it is further guaranteed by a second bank so that the risk of default for the seller is reduced even further; if the first bank refuses to pay, the second one will.
Other Related Instruments
In addition to Letters of Credit, Euro Exim Bank also provides its customers with performance bonds and bank guarantees. Both of these instruments are also used in international trade to reduce risks of default by contracting parties.
Euro Exim Bank serves a diverse range of corporate clients and import/export businesses worldwide. By taking advantage of new technology we are part of the digital revolution in international payments. Euro Exim Bank is headquartered in St. Lucia in the West Indies with a Class A banking license and a non-regulated representative office in London, England. The Bank provides essential financial services to SME’s and Corporates traditionally hampered by high costs of foreign exchange and restrictions on liquidity in challenging jurisdictions.