agric loans
Borrower’s Procedures – a Broker´s Fantasy
What is a Bank Guarantee?- Understanding BG and its uses
The term “bank guarantee” has no precise definition, particularly in international law. Some use the term exclusively to describe a transaction in which one party makes an independent guarantee commitment in respect of another party’s liabilities, regardless of the latter’s form and enforceability. Others describe guarantees as all transactions in which security is offered; from letters of comfort (which often are morally binding at most) to surety bonds and abstract payment undertakings.
A Bank Guarantee can be described as a Letter of Guarantee issued by one bank to another bank to guarantee the performance of an obligation on the part of the applicant, guaranteeing the beneficiary.
A Bank Guarantee is where one Bank (the Issuing Bank) issues an indemnity to another Bank (the Beneficiary Bank) or directly to a Beneficiary, on behalf of its account holder. The Issuing Bank will expect its account holder to pledge ‘assets’ to the bank for its issue.
Bank Guarantee’s take many forms.
Some Guarantees are written to guarantee rental payments, some are written to guarantee payments upon the meeting of certain conditions. Some are even issued to guarantee loans and credit lines. All of them are written for a specific purpose to a specific party.
Each Bank Guarantee will be worded for the purposes it is intended. Some may be ‘callable upon demand’ or some may only be ‘callable’ when the Beneficiary provides notice of satisfaction of a pre-determined condition.
Currently, under the new Uniform Rules for Demand Guarantees (URDG 758) an underlying contract should be provided that states clearly the purpose of the Bank Guarantee and forms part of the Guarantee, for example a Rent Agreement or Payment Obligation.
In international trade dealings, buyers and sellers often experience problems of trust within each other to honor their payment obligations. A seller may find it difficult to ascertain the buyer’s willingness and ability to make payment, whilst the buyer may not be convinced that the seller genuinely intends to perform his side of the agreement or has the necessary financial and technical resources to do so. Just as the buyer needs protection against non-performance, so the seller will want to minimize or insure against the risk of non-payment. Documentary credits are generally used in such cases, yet various other forms of bank guarantees are available.
The common element in all these arrangements is that the guarantor undertakes to be answerable for the payment of a debt or the fulfillment of a payment obligation in the event of default by the party that is responsible for it.
DL Financial Limited are direct provider of bank Guarantees (BG), SBLC, DLC and All other types of Letters of Credit. We are legally registered Financial Firm with good reputation. We only work with Top Prime rated global banks.
We deliver with time and precision as set forth in the Deed of Agreement (DOA). All our customers can engage our leased bank instruments into trade programs, Business expansion projects, Aviation projects, Agricultural projects, Petroleum/Oil/Gas, Telecommunication, Construction Projects and any other turnkey project. Our terms and Conditions are reasonable.
DESCRIPTION OF INSTRUMENTS:
1. Instrument: Bank Guarantee (BG)/SBLC
2. Total Face Value: Eur/Usd 1M MIN and Eur/Usd 50B MAX).
3. Issuing Bank: HSBC, Barclays Bank, Standard Chartered, Citibank or AA rated Bank in Western Europe or USA.
4. Age: One Year, One Day
5. Leasing Price: 4% of Face Value plus 1% brokers commission (only if there is a broker involved in the transaction)
6. Delivery SWIFT TO SWIFT.
7. Payment: Wire Transfer.
8.. Hard Copy: Bonded Courier within 7 banking days.
All relevant information will be provided to any serious customer upon request.
Please forward all your inquiries & consultations to our contact details as follows:
We Are Providers of Loan, bank guarantees & SBLC (https://dlfinancial.wordpress.com)
Financial Instruments- International Structured Trade Finance
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What is the difference between recourse and non-recourse debt?
The difference between recourse and non-recourse debt is the ability of the lender to take the assets of the borrower if the debt is not paid. Non-recourse debt favors the borrower, while recourse debt favors the lender.
When a lender is given recourse rights in a borrowing arrangement, it means that the lender can pursue repayment of the debt from the borrower by seizing designated borrower assets. Thus, recourse debt refers to an agreement where the lender can attach borrower assets, while non-recourse debt refers to an agreement where the lender cannot do so (other than for assets specified as collateral).
However, a recourse arrangement may only allow the lender to attach specifically identified borrower assets, beyond which the lender has no ability to obtain additional borrower assets. In this case, the existence of a recourse feature may not provide complete risk mitigation for the lender.
A lender is most able to impose a recourse debt agreement on a borrower when the borrower is unable to obtain financing elsewhere on better terms, and especially when the borrower is in difficult financial circumstances. Conversely, a borrower may be able to demand non-recourse debt terms if it can select from many lenders and has such excellent financial results and asset reserves that it can justify its demands.
A lender may be more willing to grant credit under a recourse loan at a lower interest rate than would be the case with a non-recourse loan, since the lender’s risk of repayment is reduced under a non-recourse situation. Consequently, some borrowers are more willing to accept recourse terms in exchange for a reduced interest rate and/or other, more lenient borrowing terms.
Alternatively, a lender may be willing to grant less credit under a non-recourse agreement, usually only up to the amount of any collateral posted against the note. Since the lender has no recourse above the amount of the collateral, it is too risky to extend additional credit.
A lender has more power in a tight credit market, and so is more capable of imposing recourse terms. The reason is that fewer lenders are willing to issue funds, which minimizes the level of competition among lenders for the business of borrowers.
Letters of credit providers- L/C, DLC, SBLC and lease bank guarantees
Letter of credit (Documentary Letter Of Credit (L/C, DLC) is the bank’s obligation to pay the seller of goods or services a certain amount of money in the timely submission of documents confirming shipment of goods or performance of contractual services.
Documentary Letter Of Credit is one of the most important means of financing in the international trade, as the letter of credit is a tool that removes most of risks as from the buyer (importer) and from the seller (exporter).
Documentary Letter Of Credit is very flexible and convenient tool of calculations, which have the widest recognition and acceptance in the world because of the following advantages:
- For the seller, the letter of credit is convenient because it removes the risk of insolvency of the buyer, because the letter of credit is the unconditional obligation of the bank to pay, regardless of the presence or absence of the bank of the applicant credit. Thus, the letter of credit provides a higher degree of protection of the seller’s interests with payment upon delivery or by collection.
For the seller of credit is convenient because it removes the risk of insolvency of the buyer, because the letter of credit – the unconditional obligation of the bank to pay, regardless of the presence or absence of the bank of the applicant credit. Thus, the letter of credit provides a higher degree of protection than the interests of the seller with payment upon delivery or by collection.
- For the customer the letter of credit is convenient because it provides greater protection of the buyer’s interests compared to the down payment, and eliminates the risk of unscrupulous sellers, because the letter of credit may be required, among other documents, the documents, issued by independent third parties (Chamber of Commerce, the insurance company, the independent inspector).
- Availability of “Uniform Rules and Practice for Documentary Letter of Credit”, which are internationally recognized, clearly defining and delimiting the obligations of the parties of the letter of credit, allows advancing the interests of the applicant or beneficiary. Thus, the letter of credit is the bank’s obligation as an independent arbitrator who shall be subject to payment of the letter of credit, regardless of the possible litigation between the parties to the contract.
The principle of autonomy and independence of the letter of credit from the contract is fundamental.
What should be important during choosing a letter of credit:
It is important to define clearly the conditions of the letter of credit: type of the letter of credit, payment conditions of the letter of credit, a list and description of the documents submitted by the payee and the requirements for such documents, the closing date of the letter of credit and the period of submission of documents.
There are the following forms of letter of credit:
Revocable Letters of Credit, which can be changed or canceled by the issuing bank without prior notice to the recipient of funds. Revoke of letter of credit does not create any obligation of the issuing bank to the payee (Article 1094 Civil Code). Nominated bank is obligated to make a payment or other operations on a revocable letter of credit, if at the time of their commission they have not received notice of the change of conditions or canceling credit. A letter of credit is revocable if its text does not explicitly state otherwise.
Irrevocable letter of credit is a firm obligation of the issuing bank to pay money in order and the terms defined by the conditions of the letter of credit, if the documents provided for by it, submitted to the bank specified in the credit, or the issuing bank, and observe the terms and conditions of the letter of credit.
Irrevocable letter of credit guarantees that the exporter will make payment to the performance of its obligations, even if an importer wants to abandon the deal. Therefore, exporter, performing a special order, for which most likely will not be another buyer, chooses exactly this kind of letter of credit.
Irrevocable unconfirmed letter of credit. When making an unconfirmed letter of credit issuing bank, providing a letter of credit, is only party that is responsible for the disbursement to seller. Nominated bank has to pay only after receiving the money from the issuing bank. Nominated bank simply acts on behalf of the bank providing credit, so it does not take any risk.
Irrevocable confirmed letter of credit – the obligation of the issuing bank is confirmed by another bank. Confirmation is an additional guarantee of payment from another bank (Bank of the exporter or prime bank).
Bank, confirming letter of credit is committed to pay for documents according to the conditions of the letter of credit if the issuing bank fails to make the payment.
According to the method of payment letters of credit can be divided into the following types of letters of credit:
1.Transferable Letter of Credit (Transferable LC) is a letter of credit, the beneficiary of which is entitled to instruct the advising bank to transfer the letter in full or in part to another person with the preservation of the conditions of the letter of credit. Transferable letter of credit may be transferred only once (if in the Credit otherwise is stated). Prohibition on transfer of letter of credit is not a prohibition on assignment of revenue on it. Letter of credit can be transferred only if it is clearly defined by the issuing bank as a transferable. The term “divisible”, “fractional”, “assignable”, “passed” and others do not give the right to consider the letter of credit as transferable. This type of letter of credit is applied when in the transaction between the seller and buyer the intermediary participates who has a letter of credit opened in his favor and transferred into its own provider. The letter of credit can be transferred only under the conditions specified in the original letter of credit, with the exception of the amount of the credit, the unit price, which can be reduced, as well as the expiry date, the last date for submission of documents after the date of shipment, shipment period, which may be reduced. During transferable letter of credit the documents should be requested so that they could be used for the initial credit. The use of this type of credit requires caution and a good knowledge of technology.
- Red clause Letter of credit. The essence of red clause letter of credit is that letter of credit requires the terms and conditions of a special clause, according to which the issuing bank authorizes the nominated bank to make an advance payment of a specified amount to the beneficiary before submitting all the documents under the Credit (prior to shipment of the goods or services). Such clause is included in the letter of credit at the request of applicant. Down payment on red clause letter of credit made by the executing bank under a written obligation of the beneficiary to submit documents in accordance with the terms of the letter of credit. After the submission of all documents executed in full. A letter of credit is named in such way because special clause was done with a red stripe.
3.The letter of credit with Payment at Sight. Beneficiary receives payment upon presentation and verification of documents corresponding to all the conditions of the letter of credit. It is provided a reasonable time for a document check before paying to the issuing bank, confirming bank or an authorized bank.
4.The letter of credit with Deferred payment. Letter of credit with Deferred payment is based on an irrevocable commitment of the issuing bank and / or confirming bank to make payment against presentation of the relevant documents not at the time of presentation of the documents and in the corresponding period of payment, determined by the conditions of the letter of credit. Letters of credit (with Deferred payment and payment by acceptance) may be a more attractive financial instruments to customers prior to the date of payment the buyer can sell the goods and pay the letter of credit, generated profit.
- Revolving Letter of Credit (Revolving LC) put up on a certain amount, after which it will be used for some time, again exposed for the payment of claims of the beneficiary as many times as is reached set the maximum aggregate limit.
The advantage for the importer is that it can order the product in quantities greater than it needs at the moment, and thus to secure a better purchase price. In this case, the delivery of goods will be divided into certain parties and must be performed at specified intervals. For exporter to ship on a schedule convenient for the importer, usually under the revolving credit indicating the dates of the respective amounts which represent the proportion of the aggregate limit.
Such statement about the date of the equity amounts forces an exporter to ship goods in time in accordance with the agreed schedule, otherwise unused equity amounts simply void, unless otherwise isn’t stipulated in the letter of credit, that is for a further letter of credit they will be impossible to use. In this case we are talking about the “non-cumulative Revolving Letter of Credit.”
If the amounts that were not used in fixed terms for them, however, are allowed to use in the future, in which case we are dealing with a “cumulative Revolving Letter of Credit.”
Revolving Letters of Credit are useful only for transactions in which the same type of product will be delivered at regular intervals to the same counterparty.
6.Stand-by Letter of Credit (Stand-by LC) was developed by the American banking system and performs the same functions as a bank guarantee. Using a Stand-by Letter of Credit is regulated by the ISP98, and UCP 600.
Stand-by Letter of Credit is a bank’s obligation to make payment in the event of default on the part of the Applicant, and is a bank guarantee. Typically, this letter of credit is opened in cases where the contract provides for payment for goods by bank transfer or otherwise, not giving an absolute guarantee of payment, and the exporter wants to protect himself, but the bank guarantee is forbidden, then in the contract the parties stipulate that as security the letter of credit will be Stand-by by the importer. Payment under this letter of credit will be made in the event of non-payment by bank transfer or otherwise, in unintended ways, on presentation of documents by the beneficiary and the special statement indicating that the counterparty (applicant for the credit) has not fulfilled its obligations in respect of payment.
The use of the term “stand-by letter of credit” is explicated in such way that the law of some states in the U.S. prohibits banks to provide guarantees, and the International Chamber of Commerce Uniform Rules for Documentary Credits under the influence of U.S. banks recognizes the application of these rules for stand-by letters of credit (Article 1). From this position, their use is preferable to a bank guarantee, which are subject to national legislation.
In recent years, access to the banks to provide credit guarantee becomes frequent, which would support the borrower’s obligation to pay to a third party or a promise to fulfill certain contractual obligations. This can be done with the help of letter of credit.
Beneficiary under a stand-by letter of credit is drawn firstly to the applicants for payment and then asks the bank to make a payment. For commercial letter of credit situation is reversed, “the beneficiary receives payment from the issuing bank, without resorting to the buyer for payment.”
Thus, as well as a guarantee, stand-by letter of credit is irrevocable obligation of the bank to pay a specified amount of stand-by letters of credit in the first written demand of the beneficiary in the event of default by a party under the Contract, subject to all conditions of the credit.
7.Back-to-back letter of credit. The letter of credit is opened by the issuing bank at the request of the client-applicant in the event of another open letter of credit in favor of the client, in which he is a beneficiary. In contrast to the transferable letter of credit, basic and back-to-back letter of credit are two legally independent from each other letters of credit, even though both are designed for the same commodity transactions.
Back-to-back letter of credit is effective in cases where the seller does not want the proxy provider to know the end customer, and vice versa. In this case, the terms of a letter of credit opened in the name of the broker, may be moved to credit, which will open in the name of an intermediary third party transactions, both credit will be run independently of each other, and the terms of a letter of credit may differ if it is necessary.
This type of credit is usually used by middlemen.
In the CIS countries to open such credit, the banks generally require collateral or broker deposits to lower the risks.
Payment mechanism
- Importer (buyer) has a guarantee that the bank will not pay for his account as long as he doesn’t receive documents in accordance with the terms of the letter of credit and is satisfied that received documents by the external signs meet the requirements of the importer.
- Banks will deny payment of documents by the importer, if the documents on the goods do not meet the letter of credit, thereby protecting the interests of the importer.
- Customer can be sure of receiving payment as soon as he provides the documents to the bank according with the letter of credit.
- Customer receives against the shipping documents, specified in the letter of credit, prompt payment (if the letter of credit provides for payment terms – on demand).
- Required documents usually include shipping documents such as bills of lading (receipt of shipmaster) goods and transport waybill, duplicate w / a bill showing that the goods have been shipped in accordance with the needs and specification of the buyer.
Letter of credit in most cases is as follows:
- Exporter and importer agree to the release of LC (Letter of credit).
- Importer (the buyer) with the consent of the exporter (seller) asks his bank to issue a letter of credit. The importer’s bank (the issuing bank) in such case assumes an obligation to pay a fixed amount to the exporter with the condition that the exporter will provide the documents that match the letter of credit for a specified period of time.
- Bank issuing informs the bank of the exporter of the credit.
- Bank of the exporter (advising bank informs the exporter that, the letter of credit is issued on his advantage).
- Exporter ships the goods, prepares the necessary documents and send them to the bank for providing in the designated bank.
- Designated bank verifies the documents and if the documents are in compliance with the terms and conditions of letter of credit, this bank will pay the amount of the documents, but not exceeding the total amount of the letter of credit.
- Designated bank sends the documents to the importer’s bank for onward transmission to the importer, who can use them to get the goods.
General advantages of the letter of credit
1.Letter of credit is very flexible computational tool that can be used for payment transactions on a variety deals of clients.
2.Letter of credit is a tool, the rules of using of which are defined in the authoritative international organization, are common and are recognized all around the world. This is beneficial to both customers and banks, as each party of the transaction has a clear understanding of rights, responsibilities, and standard requirements to all participants in the operation.
3.Letter of credit is useful as a tool for short-term financing.
Advantages of the letter of credit for importers
1.Letter of credit may open by own expense of the client, by funds provided by the bank on credit, as well as by providing support by customer to fulfill its obligations (mortgage, deposit).
2.Payment is performed after shipment of goods and delivery of documents.
3.Importer determines a list of the documents against which will be issued payment.
4.Limit the period of providing of the documents and shipment of goods.
Advantages of the letter of credit for exporters
1.To the obligation of the buyer to pay, it is added an obligation of the issuing bank, this liability does not depend on the relationship between the seller and the buyer.
2.If the letter of credit is confirmed, so there is a guarantee of payment from the second bank.
3.Performance of the letter of credit is a guarantee of payment.
The similarities between the letters of credit and guarantees
1.Letter of credit and guarantee are due to the existence and the need to secure the obligations of partners in a transaction.
2.Letter of credit and guarantee are the bank’s obligation to make payment to the beneficiary against certain documents;
3.Letter of credit and guarantee are paid during the provision to the bank well-defined and clearly understood terms of those instruments of documents.
4.Commercial banks offer guarantees and letters of credit on the base of written confirmation of the presence of obligations in the applicant that are provided by such guarantees or letters of credit (the contract, etc.).
The differences between the letters of credit and guarantees
- Letter of credit is opened with the intention of using it, that is, payment by letter of credit is a phenomenon that occurs during the normal course of events (method of payment). Guarantee is used as a way to ensure obligations and is used if in the process of the implementation of one of the parties of the transaction is not able to meet its own obligations.
- Letter of credit is used as a method of payment in one form or another. The guarantee can cover almost any kind of obligations (the advance payment guarantee, performance of contractual obligations, tender obligations, repayment, payment of customs duty, payment of a fine or compensation fixed by the court, the observance of the guarantee period of equipment, guarantee of the payment of court collateral, guarantee of payment of the transfer a football player and many others.) Area of application of guarantee, thus much wider than in credit.
- Letter of credit is a transferable tool, as it allows to optimize the calculations between the partners. Guarantee in rare cases can be transferable as all that is required to receive funding under the guarantee is the requirement of payment, which makes it a ground for abuse of this tool.
DL Financial Ltd issues Real Bank Guarantees, real and genuine SBLC’s and completes Real Funding without long stories!
DL Financial Limited (DLFL) are genuine and reliable providers of loan, international project funding, Lease bank guarantee providers, buy, lease or rent sblc, dlc and all letters of credit. Kindly contact us today for all your financial needs.
Skype: dl.financials.limited
Email: info@dlflimited.net
Website: http://www.dlflimited.net
Twitter: https://twitter.com/dlfinancial
Lease bank Instruments (Letters of Credit, Bank Guarantee, SBLC, DLC)
We are direct providers of freshly cut bank instruments like BG (Bank Guarantee), MTN’s (Medium Term Note), SBLC (Standby Letter of Credit) & DPLC’s (Direct Pay Letter of Credit) CD’s (Certificate of Deposit), and just about every other type of financial instruments available through our network.
ALL OUR BG, SBLC AND LETTERS OF CREDIT ARE ISSUED BY TOP PRIME AAA RATED BANKS LIKE BARCLAY’S BANK LONDON, DEUTSCHE BANK AG GERMANY, HSBC, STANDARD CHARTERED BANK ETC.
- Bank Guarantee (BG) in US$ or Euros
- Standby Letter of Credit (SBLC) in US$ or Euros
- Medium Term Notes (MTN’s) in US$ or Euros
- Treasury Bills (T-Bill) in US$ or Euros
- Documentary Letter of Credit (DLC, SLC, LC) in US$ or Euros
- Promissory Notes in US$ or Euros
- Discounting of Bank Instruments
Our bank instruments can be engaged in PPP Trading, Discounting, signature project(s) such as Aviation, Agriculture, Petroleum, Telecommunication, construction of Dams, Roads, Bridges, Hospitals, Hotels, Condo, Real Estate and all kind of international business trading including oil/gas business, diesel, Gold Dust, Gold Bars, Rough Diamonds etc.
1. Instrument: Bank Guarantee (BG) /StandBy Letter of Credit (SBLC)
2. Total Face Value: Eur/USD 1Million (Min) to Eur/USD 50Billion (Max)
3. Issuing Bank: Barclays Bank, HSBC, Lloyds Bank London, Standard Chartered Bank, Deutsch Bank AG, Frankfurt or any AA Rated Bank.
4. Age: One Year and One Day
5. Leasing Price: 4% of Face Value a plus 2% brokers commission (1% for the lessee side and 1% for the lessor side, PLEASE NOTE, THIS BROKERS COMMISSION COMES INTO EFFECT ONLY IF THERE ARE BROKERS INVOLVED IN THE TRANSACTION)
6. Delivery: Bank-To-Bank Swift.
7. Payment: Wire Transfer
8. Hard Copy: Bonded Courier within 7 banking days.
BUYING AND SELLING GOODS INTERNATIONALLY WITH LETTERS OF CREDIT
BUYING AND SELLING GOODS INTERNATIONALLY
International sales transactions between sellers and buyers
require an agreement as to the form of payment for the goods.
Various methods of payment settlement include but are not
limited to open account, foreign collection, cash in advance and
documentary credit. One of the most common forms of payment
is documentary credit, which is also known as a Letter of Credit.
What is a Letter of Credit?
A Letter of Credit is literally a “letter” pertaining to a sales
transaction between a buyer and seller. The “letter” is initiated
by the buyer and is directed to the seller or beneficiary, in most
cases. In some cases, the beneficiary may not necessarily be
the Seller but would be the party possessing the right to receive
payment for the goods or services. (Please refer to the
webpage dealing with transferable letters of credit for additional
information.)
A Letter of Credit is the traditional worldwide risk management
tool for international transactions. Issued by a foreign bank
(representing the buyer) and confirmed by a corresponding
bank usually in the country of the seller, a Letter of Credit is the
overseas bank’s commitment to pay the seller’s drafts. A Letter
of Credit is opened by an issuing or opening bank. The buyer
chooses the opening bank.
Revocable vs. Irrevocable Letters of Credit
A Letter of Credit may be revocable or irrevocable. In a
revocable Letter of Credit, the issuing bank (representing the
buyer) has the right to cancel or alter its obligation at any time
before payment of a sight draft or acceptance of a time draft.
That situation exists even if goods were shipped in reliance on
the expectation of payment.
An irrevocable Letter of Credit that is accepted by the seller,
however, cannot be altered or canceled without the consent of
the seller. Any change to an irrevocable Letter of Credit requires
the consent of all parties. Consent would include any parties
beyond the buyer and seller. For example the confirming banks
would be affected parties.
Confirmed vs. Unconfirmed
An irrevocable Letter of Credit can be either confirmed or
unconfirmed.
In a confirmed Letter of Credit, the issuing bank (representing
the buyer) agrees independently to the buyer’s commitments to
pay the seller the agreed-up amount of money, as long as all the
requirements of the Letter of Credit are fulfilled.
A confirmed irrevocable Letter of Credit can become very
elaborate. A second bank (often specified as a prime bank) may
confirm or otherwise guarantee payment of the foreign bank that
initially opened the Letter of Credit. This requirement originates
from the seller and usually takes places only if the bank of the
buyer is not internationally established.
Other types of Letters of Credit
Other types of Letters of Credit may include straight or
negotiation credits. These types of Letters of Credit inform the
seller whether any bank, or only certain banks, can process the
documents of the seller to receive payment. All of the various
types of Letters of Credit can be combined in various ways with
extended rights and/or obligations, depending upon the exact
type of Letter of Credit issued. A Seller should be aware of
rights under a Letter of Credit before proceeding with a sale.
Letter of Credit rules- International Chamber of Commerse
A Standard Documentary Credit Application Form has been
developed by the International Chamber of Commerce (ICC), in
Paris, France. The ICC has also published a guide to
Documentary Credit Operations. Banks throughout the world
adhere to the rules developed by the ICC.
The rights and obligations of buyers, sellers and participating
banks in international Letters of Credit transactions are
presented in careful detail in publications made available by the
ICC. Under the Uniform Customs and Practices for Document
Credits (UCP), the International Chamber of Commerce has
made available in a publication called the UCP 600. The
publication is almost always referred to in international Letter of
Credit forms and is a part of the Letter of Credit contract. The
ICC also has available ICC Publication No. 511, which takes the
reader through UCP 600 on an article-by-article and
clause-by-clause basis. The ICC Publication No. 511 also
explains the reasoning that led the ICC Working Group to
develop a thoroughly revised sets of Rules for Documentary
Credits under UCP 600.
Benefits of using a Letter of Credit
By conducting export sales transactions under an irrevocable
Letters of Credit, the seller does not have to determine the
credit standing of the foreign buyer. Letters of Credit are issued
in many different forms from foreign banks and financial
institutions. The variations are due to differences in customs
and regulations of trade and finance in the country of origin of
the issuing bank or financial institution. If, for any reason, a
seller cannot comply with one or more conditions of a Letter of
Credit, it is absolutely imperative for the seller to contact the
buyer to arrange for one or more amendments to the original
agreement.
Letter of Credit Discrepancies
If there is a disagreement between a sale contract’s shipping
and documentation requirements and those in a Letter of Credit,
the seller must take immediate action before shipping to arrange
for an amendment to the Letter of Credit. If the seller does not
arrange for such an amendment, the seller may experience
payment problems. Full compliance with all conditions for
payment are interpreted by banks rigidly. Any disagreement,
however small, represents grounds to reject the payment of the
draft.
On a worldwide basis, approximately 60% of document
presentations on Letters of Credit are presented with
discrepancies. Banks charge for EACH discrepancy. Therefore,
it is extremely important to ensure document presentations are
accurate and complete to avoid additional costs and delays in
payment processing.
Payment on a Letter of Credit
The documents listed in a Letter of Credit are presented to the
negotiating/paying Bank with a draft, which is sometimes
referred to as a “bill of exchange”. A draft resembles a check. In
a Letter of Credit sale, the drawee on the draft is the bank that
issued the Letter of Credit. The seller is the drawer of the draft.
Drafts are classified as either sight or time. A sight draft requires
a drawee to pay the amount shown in full upon proper
presentation of documentation. On a time draft, a payment date
later than the date of presentation would be stipulated (such as
60 days after sight or 90 days after sight).
When properly presented, a time draft is accepted by the
drawee. This means the drawee indicates an acknowledgement
that the necessary conditions to its payment were met and the
drawee is obligated to pay on the appointed date.
Paying a sight draft or accepting a time draft when documents or
goods have been presented is known as honoring the draft.
If the Letter of Credit states “payment at sight”, the seller should
receive payment within a reasonable time (usually not exceeding
seven days) after documents are presented within the validity
period of the Letter of Credit and accepted by the negotiating
(paying) bank.
Usual Letter of Credit conditions
The usual conditions included in a Letter of Credit include
delivery dates, product specifications and receipt by the bank of
specific documents (such as negotiable bills of lading, inspection
certificates, commercial invoices and packing lists). Any required
documents must be presented to the bank within a specific
period of time. There may also be other terms and conditions as
negotiated between the buyer and seller.
Letter of Credit terms and conditions (and all required
documents) should be agreed upon between the buyer and
seller, in advance of opening of a Letter of Credit. Letter of
Credit issuance instructions should then conform to the terms of
such an agreement.
Exporters in the United States should request the overseas
buyer to open an Irrevocable Commercial Letter of Credit,
payable 100% at sight, freely negotiable or confirmed by a bank.
If the Letter of Credit is to be confirmed, the seller should also
request the buyer to instruct the issuing bank to obtain the
Letter of Credit confirmed by a bank in the United States.
We Are Providers of Loans, Project Funding, bank guarantee, SBLC & DLC
DL Financial Limited is legally registered in London with company registration number: 09474265. Our major partners and private investors are Arab and Middle East investors which is why we offer very flexible loan terms; our loan interest rate is 3% per year which is one of the lowest in the industry.
We are also direct providers of bank financial instruments such as Bank Guarantees (BG), Standby Letters of Credit (SBLC), DLC and Letters of Credit. Our Bank Instruments are issued by top prime banks such as HSBC London or Hong Kong, Barclays bank London, Citi Bank New York, Standard Chartered, Deutsche Bank, UBS Zurich, Switzerland or any bank of your choice.
OUR SERVICES INCLUDES BUT NOT LIMITED TO:
Loans & International Project Funding
Lease, Rent or Purchase Bank Instruments such as BG, SBLC, DLC, Letters of Credit (L/C)
Proof of Fund (POF) or Blocked Funds for Investments
Insurance & Escrow Services
Trading Platforms
Show Net Worth Requirements
Corporate Finance
Private Equity
Investment & Wealth Management
Joint Venture Funding – How to Present Your Project to Get Funded
DL Financial Ltd Welcomes you to the last quarter of 2015, the defacto year of Joint Venture (JV) financing. Institutional financing is not available so developers are looking outside the box to fund their projects. The most common form of favorable financing is JV. This financing comes in more shapes, sizes, and terms than colors of the rainbow. There are, however, a few common things that all JV funders look for, regardless of the project, location or dollar amount. The purpose of this article is to share with you what these common denominators are and how you should present your project to get the most favorable terms.
Let’s look at this from your potential funder’s perspective. What does he want? The answer is simple, but arriving at achieving his goals involves a tremendous amount of scrutiny and due diligence on you, the developer. Quite simply, the JV funder wants a return on his investment. You must speak his language. What he wants is a pro forma that shows what his internal rate of return (IRR) is at two and five years. If you cannot prepare one of these, find someone who can. This document or spreadsheet shows vision and the common goal of making money.
Everything else is secondary, but also very important. You need to prepare a package that consists of the following items:
- an executive summary of the project that is no more than 5 pages (no funder will read a 120 page business plan before reading an executive summary)
- the proforma
- bios and resumes of all of the key players, including your contractors
- the entire business plan
- an appraisal if you have one
Logically, the funder has the money. You have to prove that you have the brains, muscle and integrity to be a great and cooperative partner. Your opportunity is not the only one on his desk, but it will certainly be the most presentable. Sloppy presentations make for sloppy projects.Finally, the worst thing you can do is put pressure on the funder to act or fund immediately. Desperation only indicates weakness and poor planning.
DL Financial Ltd. 