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Letters of Credit
A Letter of Credit [L/C] is a great business tool for importers to protect their own, as well as their supplier's interests. An L/C is essentially a bank guarantee for payment of supplied (imported) goods. It is often at the request of the overseas supplier that payment for goods are made in advance to protect them from default on payments.
While OFX doesn't issue L/Cs, we can help you save money on the foreign exchange transfer involved.
A simplified L/C process would take place as follows:
- Buyer and seller agree terms of trade (price, specification, shipping etc.).
- Buyer applies for L/C from issuing bank.
- Issuing bank sends L/C to supplier's bank.
- Supplier sends goods to importer.
- Assuming agreed terms are met, issuing bank pays supplier.
Now here's where OFX comes in...
Ordinarily, the issuing bank would debit the importer's account in their local currency, and convert it at the bank's chosen rate to pay the supplier in the foreign currency. By advising their bank not to proceed with the debit of their bank account, an importer can have OFX make the conversion. Payment would then be made to the issuing bank in the foreign currency. OFX does not charge extra for this service, and savings can be substantial. Payments for L/Cs still attract the same competitive OFX rates.
Please contact us for more details or fill in the form below.
