|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.
| Trumpery Here is the definition of the above word in the Oxford dictionary, which ought to know what it means if anyone does.NOUN (plural trumperies):1 Attractive articles of little value or use.
1.1 Practices or beliefs that are superficially or visually appealing but have little real value or worth.
1 Showy but worthless: trumpery jewelry
1.1 Delusive or shallow: ‘that trumpery hope which lets us dupe ourselves’
Late Middle English (denoting trickery): from Old French tromperie, from tromper ‘deceive’.
N. B. We have learned that Donald Trump’s original family name was Drumpf. One of his forebears changed the name to Trump, unaware of any potential future irony. It’s probably just a bizarre coincidence that so many in the United States and without think that the word ‘trumpery’ fits Trump so well.
|A Satisfying OccurrenceWe got a call recently from someone looking for a rather small standby letter of credit. They needed it for their mobile phone retail business, in favor of the mobile company. There wasn’t anything we could do. But we learned that the company’s owner had emerged from a lease-related bankruptcy several years earlier, and their existing bank refused to issue a four-figure standby LCeven though their client would put up the money necessary to back the SBLC. We further learned that the company’s annual sales were in the mid-seven figures annually. Their bank was refusing to approve a transaction that didn’t expose the bank to risk, over a laughable amount of money.Although there was nothing we could do, it did seem that the problem had a solution. We suggested to the principal that he should make his company the subject of a bank food fight. Clearly, the incumbent bank didn’t appreciate their client. But the company might seem much more appealing to a bank that didn’t yet have them as a client. We suggested a two-pronged strategy: reach the top available official at his existing bank, and find out if other banks would be interested in their business.We heard from our client a couple of hours later. Based on his outreach calls, two new banks were already sending managers over to compete for their business. So it is now much more likely that we will have helped the client to solve his problem, even though the response to his question, “Can you get me a standby LC?” had to be “no.”
The takeaway from this: a focus on what a client needs may indirectly get them what they want.
|Get in touch if we can assist you with letters of credit or finance situations requiring insight. Just click on the email link below and write us an email.We call it Jigsaw Capital because to us, life is a series of puzzles to solve. Financial puzzles, that is. We don’t have the time for jigsaw puzzles these days.Authored By Editted By:Doug Friedenberg R&D Team