Month: January 2016

An LC Problem Solved


Greetings!   westcap_0001_Layer 6                                                              We perform a number of tasks related to letters of credit. Last month we assisted a client in getting paid immediately against a Documentary Letter of Credit that was due to have funds released four months after the necessary documents were presented. In the industry that’s called a usance LC. (When dictated into the phone, it came up “useless Elsie”. There are still a few bugs in voice recognition).The issuing bank was in a non-European country with Mediterranean beaches and the client was here in the US. To complicate things further our client was providing services, not goods, to his Middle East customer and the letter of credit was to pay for those services.We and our partners made certain the correct documents were required in the letter of credit to satisfy LC requirements so that the bank could advance the money.  This is trickier than you might think; banks are a lot more comfortable with LC’s related to goods rather than services.After that part, the last bit was much easier: getting the client paid immediately (at sight, in LC parlance), even though the LC specified payment in four months from date of document submission.  As it happens, the interbank rates in such cases are usually much less than normal bank interest charges to customers, so the customer saved money here too when those lower charges were passed through by the bank.

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