Letter of Credit
LC's are used in international transactions to ensure that payment will be received where the buyer and seller may not know each other and are operating in different countries.
We deal with two types of Letters of Credit
At Sight
Payable immediately – within five to ten days – after the seller meets the requirements of the letter of credit.
Usance
Also known as Deferred Payment LC or Time LC or Term LC is a letter of credit payable at a predetermined time / future date after the conforming documents are presented.
General Ask
- Applicant sends us the pro-forma/sales invoice.
- GULFOASIS will create a draft instrument and send a quote to you stating our charges (to be paid in advance).
- Once the draft has been accepted, an indemnity with be sent to you (KYC/AML/due diligence) documents which need to be signed and notarized by a lawyer.
- We also send you a formal invoice for our indemnity process and issuance charges.
- Once our invoice has been paid, along with all indemnity documents, subject to legal and compliance acceptance, we will SWIFT the instrument to the beneficiary's bank.
- Escrow account facilities with a UK third party are also available to assist in settlement of invoices, and we request for a commitment fee along with Escrow administration charges.
- The beneficiary sends the goods to you and the documents to us.
- Once documents have arrived, we have three business days to act on it, after which, if formally accepted, we send you a copy of the documents.
- Upon acceptance of the documents, you will be required to pay the beneficiary. When completed, we send you all the original documents.
- Goods arrive.
Standby Letter of Credit
A standby letter of credit (SBLC) is a guarantee of payment issued by a bank on behalf of a client that is used as "payment of last resort" should the client fail to fulfill a contractual commitment with a third party.
Standby letters of credit are created as a sign of good faith in business transactions and are proof of a buyers’ credit quality and repayment abilities.
The institution issuing the SBLC performs compliance and brief underwriting duties to ensure the credit quality of the party seeking the letter of credit, then sends notification to the bank of the party requesting the letter of credit (typically a seller or creditor).
Importantly, when requesting a SBLC, a business owner proves to the bank he is capable of repaying the loan. Collateral such as promissory notes, post-dated cheques and Escrow deposits will be required to protect the bank in case of default. The business owner must pay a SBLC fee for each year that the letter is valid. The negotiable fee is typically 5-10% of the SBLC value.
General Ask
- Applicant sends us underlying contract (Ex: Sales Contract / pro-forma invoice).
- GULFOASIS will create a draft instrument and send a quote with our charges (to be paid in advance).
- Once the draft has been accepted, we send the indemnity (KYC/AML/due diligence) documents which need to be signed and notarised by a lawyer.
- We also send you a formal invoice for our indemnity process and issuance charges.
- Once we receive our charges and all DD checks are completed and approved, along with all indemnity documents, we will SWIFT the instrument to the beneficiary's bank immediately.
- Beneficiary is paid at least 14 days before the expiry date (Up to 2 years from SBLC issue date).