Faith Acquisition Through Letter of credit in a Deal

by Harsh Varma SEO Executive

Business relationship depends on faith or trust . Trust is the milestone of a business. If there will be a trust in a business than your relation will be run from generation to generations. But acquiring trust in a business deal is not an easy task, especially if we deal with a new customer or seller. Achieving affirmative vendor relations globally or domestically in a world of global supply sources helped the businesses to expand significant reward.

Trust able business relations facilitated timely purchasing opportunities for the sellers or manufacturer to export their products or services. It frankly improves fidelity that can augment working capital access by the businesses. All types of finance options help in awarding the relationships as well as payments to suppliers. Seller or owner of a business need a financial trust to trust on the customer that a he will pay a full amount within a decided time period. And customer desires to trust on seller that a quality of a good that he is purchase should be beyond his expectation.

How Letter of Credit helps to build a Financial Trust-

Letter of Credit is an action which guarantees payment by a bank (or lending institute) to a third-party for an assured amount of cash. The payments produced if definite conditions are met. This is a vital financial instrument through which the banks transact and finance imports and export businesses.

Through a letter of credit, a bank provides its credit on behalf of its client's credit. Mostly it is used by the import and export traders where the bank plays a mediator role and helps in completing the operation. Here the bank or the letter of credit issuer contract only in given qualifications and does not observe the products or services themselves.

A valid letter of credit needs to be issued to acquire the trust . Following are the terms for which letter of credit is issued:-

1. For a fastidious recipient,

2. For an accurate amount,

3. With a definite termination date,

4. A declaration of how payment to the heir will be made, and

5. The detailed circumstances for payment release.

What is the role of banks?

In a business dealing, bank acts as a mediator provides additional security to both parties. The letter of credit issuing bank workings from the seller's side similarly the buyer asks the advising bank. For the releasing of money, the seller needs to furnish obligatory documents with the help of the advising bank to the issuer of letter of credits.

Quality Assurance with Letter of Credit:-

Banks only verify the documents not go through the products or services associated. So, there are some primary documents associated with Letter of credit to assure quality of products or services. The documents that are required is:-

1. Commercial documents

2. Insurance documents

3. Transfer documents

4. Other documents