Know More About Letter Of Credit Obtained Through Offshore Banking

A letter of Credit (LC) is the financial contract between the bank, the customer of the bank and the beneficiary. The LC is typically issued by an importer’s bank and guarantees that the beneficiary will be paid once the letters of credit’s conditions are met.

This letter is issued by the bank and offered as the facility. It is also called documentary credit. It serves as a promise of timely payment of the total amount by the buyer to the seller. If the buyer couldn’t meet the obligations of paying the due balance within the mentioned time period, then the bank will make the payment on behalf of the buyer.

Usually, you can get these services with offshore banking. Usually, the bank will collect the money with a fee which is a certain percentage of the amount of the letter. If you are running a business and are involved in internal trading frequently, then you can use financial instruments such as letters of credit, bank guarantees and many more.

Importance of Letter of Credit in trading:

In international trading, know that the distance is long. The main reason why many businessmen avoid international trading is the lack of trust between them. The sellers usually request the buyer a guarantee so that they can carry out international trading without any issues. The common financial guarantee that can be obtained through offshore banking is the Letter of Credit.

The parties involved in getting the letters of credit are the importer or the applicant, the bank which issues the letters of credit – also known as the importer’s bank and the exporter or the beneficiary. Since offshore banks offer the best services, it's always best to choose the right bank which offers incredible offshore banking services.

Advantages of getting the Letter of Credit:

Letters of credit usually offer various benefits to businessmen in international trade transactions. Here are some of the major advantages of getting letters of credit:

•    It offers the trading partners a chance to transact and also interact with the unknown seller to establish a new trade relationship.
•    This financial instrument helps in expanding and broadening the business quickly to new geographical areas.
•    The letters of credit are highly stable and effective.
•    Both the trading partners – sellers and buyers will be put the certain terms and conditions as per the trading requirements and demands. Then they will arrive at a mutually exclusive list of clauses.
•    The financial instrument makes the issuing bank independent of the trading partner's obligations and conflicts arising out of the liabilities.
•    It also transfers the creditworthiness from the buyer or exporter to the issuing bank. The importer can carry out any number of transactions at the same time.
•    Also, getting the financial instrument is the safer option for the exporter as well as the importer.
•    You can get the financial instrument quickly from the bank and facilitate any type of trading with the Letter of Credit.