Letters of Credit and Collection
Letters of Credit (Import/Export)
When carrying out import/export business relationships, there may be a number of dominant factors to be considered. Letters of credit issued by any bank provide comfort and safety to the purchaser as well as the buyer, thus contributing to minimize risks inherent in international trade.
Import Letter of Credit
A letter of credit is a commitment acquired by the bank, acting on behalf of the importer, to guarantee the payment of the goods or services provided by the seller within a specific time limit and against documents established. A letter of credit affords the buyer security that payment will only be made upon presentation of the required documents.
Benefits:
- 24 hours maximum issuance time
- Network of correspondents around the world
- Specialized counseling
- Service through Online Banking (Multibank On Line)
Export Letter of Credit
Exporters may face significant risks when working in international trade, either due to delay or nonpayment of the exported goods. If you are a new exporter or one who has been established as such for a long time, Multibank’s commercial services may help you reduce risks, by allowing you to focus on the growth of your export business. To benefit from the export services you must simply tell your buyers to issue their credit letters with us.
Benefits:
- Security in reimbursements
- The credit (payment) risk is reduced
Shipping Guarantees
In certain situations, your goods may reach port before the shipping documents may have been processed through the banking activities system. A Naval Guarantee issued by us is accepted by all shipping companies at the national level.
Benefits:
- Allows for immediate possession of goods prior to payment and receipt of the documents.
- Avoids delay in your daily business.
- Eliminates costly charges for delays or storage.
- Allows for deferring payment until the seller submits the documents.
Letters of Credit (Stand By)
The Stand – By Letter of Credit may be used for many purposes, including:
- Covering noncompliance or omission of a contract
- As a way of guaranteeing credit facilities
- To support open account purchases by an importer
- To cover advance payment of a commercial transaction
Letter of Credit (Under CCC GSM-102 Program)
USDA Commodity Credit Corporation
The U.S. Department of Agriculture (USDA) manages this credit guarantee program to promote the export of agriculture and livestock products from the United States. It provides financing with credit terms ranking from 6 months to three years. The short-term credit program is known as GSM-102. This program covers commercial credits granted for financing sales and does not constitute a subsidy or a form of food aid.
In both programs the USDA Commodity Credit Corporation endorses credits granted by U.S. banks to foreign banks, which use irrevocable letters of credit in U.S. dollars as way of paying for the imported agricultural products. (1) Letters of credit must be opened in accordance with the importer’s instructions, which, in turn, has the option of negotiating its own credit terms with local banks, in order to allow them to make the deferred payments for agriculture and livestock products imported from the United States.
Documentary Collections (Import/Export)
Documentary Collections afford simple, profitable and safe means of doing business internationally. If your purchaser does not work with Letters of Credit, Documentary Collections provide the best alternative and safest system for the open account trade or else, if you are the purchaser, we receive the documents of the goods you are buying and we will take care of presenting them to you (collection process) in accordance with the vendor’s instructions.
In collections, banks act as intermediaries, ensuring that documents are delivered only against payment or acceptance. Collections offer the vendor the facility that it will not lose control of goods without payment or promise of payment. On the other hand, from the perspective of the buyer, collections afford a simple and even more economic alternative than a letter of credit, thus allowing for negotiating under better terms.
We offer options with the Documentary Collection methods that provide ease and help you reduce costs:
- Documents against payment (D/P) - documents are delivered to importers against payment.
- Documents against acceptance (D/A) - documents are delivered to importers against acceptance of time bill.
Simple Collections (Sending of Checks to be Collected)
Simple Collections involve the receipt of payments through checks in foreign currency/U.S. Dollars or checks that are not negotiable in local banks. The service offered in this case is to Send them to be Collected.
Benefits:
- The request may be made from any of our branches.
- Funds are credited to the indicated account once they are received.
- Reliability in the handling of the document.
