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Documentary Letter Of Credit

Settlements by letter of credit are widely used in connection with contracts with foreign suppliers and intercity deliveries, because the Bank assumes the function of monitoring the consistent fulfillment of the payment terms of contracts by the parties.

A letter of credit is a conditional financial obligation of the Bank, undertaken on the payer’s request, to execute payments in favour of the beneficiary upon the submission by the latter of the documents corresponding to the terms of the letter of credit, or to another authorized bank to execute the payment.

The Bank acts as an intermediary between the buyer and the seller, and executes the payment in favour of the seller exclusively upon submission by the latter to the Bank of the set of documents stipulated in advance. It offers the seller and the buyer the following advantages:

Advantages for the Buyer (the Importer):

  • A letter of credit enables the buyer to confirm its paying capacity, which is especially important when establishing new trade relations;
  • By guaranteeing the payment with a letter of credit, the buyer can achieve more profitable terms of delivery and payment for the goods;
  • The riskiest form of settlement, i.e. prepayment, may be rejected.
  • The buyer can be sure that the Bank will pay money to the seller no sooner than it receives the documents corroborating the delivery of the goods;
  • In case the documents submitted by the seller do not correspond to the terms of the letter of credit (the deadlines are not met; the quality, quantity, packing etc. are not in compliance with the letter of credit), the buyer can be sure that the payment under the letter of credit will not be executed;
  • Banking experience and knowledge for the implementation of complex commercial contracts can be applied;
  • A credit against goods may be obtained when using a letter of credit with deferred payment;
  • With a time letter of credit, the importer is able to sell the goods before the date of payment and to pay for the transaction with the revenue.

Advantages for the Seller (the Exporter):

  • The riskiest form of settlement, i.e. payment on delivery, may be rejected.
  • A letter of credit is a payment obligation of the Bank, and the seller can be sure of receiving the money subject to the timely submission of the documents corresponding to the terms of the letter of credit to the Bank;
  • The prompt receipt of money immediately upon delivery; payment under the letter of credit will be executed by the issuing bank subject to the submission of the appropriate documents to the bank regardless of the buyer’s wish;
  • An additional guarantee of payment may be received, i.e. confirmation by a first class foreign bank;
  • A wide choice of financing forms for any terms of transaction.

In settlements using letters of credit, Credit-Moscow Bank can act as:

  • Issuing bank;
  • Executing bank;
  • Confirming bank;
  • Advising bank.

The knowledge and experience of our employees and the network of correspondent relations of Credit-Moscow Bank enable the risk connected with documentary settlements to be minimized. If you apply to our Bank before starting the process of concluding a contract, you will receive an in-depth consultation with our experts on the optimization of expenses and the selection of the letter of credit type.

Branches: 
Moscow: tel.: (495) 72-707-72, msk@cmbank.ru

Copyright © Credit-Moscow Bank
Small Business Loans

Moscow: tel.: (495) 72-707-72; fax: 237-52-98; Address: 8, 6th Monetchikovsky Lane.
Saint Petersburg: tel.: (812) 635-75-75, fax: 310-13-69; Address: 54, Sadovaya Street.

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