|BUSINESS FINANCE PROBLEMS AND SOLUTIONS.|
You may have gotten the impression by now that we deal with Letters of Credit in all shapes and sizes. It’s true. One particular type of LC we do a lot of work in is a niche product but very useful in some industries. We’re referring to a documentary letter of credit which can be issued without collateral. Issuers of such letters of credit structure the LC in a way to manage their own capital risk and hold the shipment as collateral pending payment by the client needing the LC.This type of LC is useful to importers who may not want to draw down their bank lines for the month or two it takes for the supplier to get ready to ship the goods, but who are able to pay for the shipment when it is on the water.
It’s commonly used in the garment industry and is easily accepted in many spots in Southeast Asia, and often for CONSUMER PRODUCTS.
Our Indian clients may recognize this by another name, as it is sometimes called an accommodation letter of credit.