Over 98,035,000 Dollars worth of equipment & parts in Inventory
 Search Wanted Ads, For Sale Ads, and Post Ads.
 Over 93,075 Monthly Visitors and 46,421 registered customers

 Find out how you can get FREE listing GET LISTED
EQUIPMENT PARTS

 World's #1 EQUIPMENT PROVIDER .:

in
: WebTraffic : Become a Supplier Send Requirements Add Site Classifieds Contact Us About Us
  
 Location:   Home - الموقع العربي   

Beware of Scammers & Spammers

  

View.Our.Inventory.List

86,000 Monthly Visitors
29,068 Registered Users
Over 75 Million Dollars . Worth Of EQUIPMENT

Find out more

  

 

  

Join EQUIPMENT.NET.... For updates on new Offers, Enquiries, News, & More!
Enter Your Email:

  

Universal.Showcase

Become the exclusive

Site featured across

Our 65 Categories

Click Here

  

 

  

 

 . Finance Related Info.

  

 . Letter Of Credit

  

 . Leasing vs. Buying

  

 

  

 . Other services.

  

 . Chambers of Commerce

  
   

   

 EQUIPMENT Category

  

equipment

  
 . Aerospace   
 . Agricultural   
 . Air Conditioning     
 . Automation   
 . Binding & Lamination   
 . Catering   
 . Chemical   
 . Cleaning   
 . Computer   
 . Construction   
 . Diamond Cutting   
 . Diving   
 . Drilling   
 . Earth Moving   
 . Embroidery   
 . Exercise   
 . Film Production   
 . Fire Protection   
 . Fasteners & Nails   
 . Fishing & Tackle   
 . Food / Beverage   
 . Generators   
 . Heat Treating   
 . Helicopters   
 . Imaging   
 . Industrial   
 . Injection Molding   
 . Land Surveying   
 . Mailing   
 . Marine   
 . Material Handling   
 . Medical   
 . Metals Processing   
 . Metal Working   
 . Mining   
 . Motion Control   
 . Networking Equip.   
 . Network Testing   
 . Night Vision   
 . Office   
 . Packaging   
 . Parking Control   
 . Petroleum   
 . Plastics   
 . Playground   
 . Racing   
 . Recycling   
 . Refrigeration   
 . Restaurant   
 . Safety   
 . Salon Equip.   
 . Satellite   
 . Screen Printing   
 . Skydiving Gear   
 . Snowmaking   
 . Stereo   
 . Surveillance   
 . Telecoms   
 . Textiles / Apparel   
 . Time Recording   
 . Traffic Control   
 . Ultrasonic Cleaning   
 . Vending   
 . Welding   
 . Wireless   
 . Wire & Cable   
 . Woodworking   
    

 

 

Lease, Finance, Rent, Buy, Sell, Equipment

Letter Of Credit

Letter Of Credit, LC, Revocable, Irrevocable, Transferable, Confirmed, Unconfirmed, Back-to-back, Standby, Cash advance against letter of credit, Lease, Finance, Rent, Buy, Sell, Equipment, leasing vs. buying, buy, lease
 
 

Fact! 80% Of EQUIPMENT.NET Visitors click on Our Members.

used parts

 Our Members: Suppliers of new/used parts and equipment

  • Become a Member : Do want to get the maximum exposure to your business, receive request for quotes (RFQ), and generate sales? Click here to find out how.

How can I become a member? Learn More!

 

 Letter Of Credit

   

Leasing vs. Buying

 . WHAT IS A LETTER OF CREDIT?
A letter of credit is basically a document issued by a bank guaranteeing a client's ability to pay for goods or services. A bank or finance company issues a letter of credit on behalf of an importer or buyer, authorizing the exporter or seller to obtain payment within a specified timeframe once the terms and conditions outlined in the letter of credit are met. The letter of credit acts like an insurance contract for both the buyer and seller and practically eliminates the credit risk for both parties, while at the same time reducing payment delays. A letter of credit provides the exporter or seller with the greatest degree of safety when extending credit. It is useful when the importer or buyer is not well known and when exchange restrictions exist or are possible.
 
 . TYPES OF LETTERS OF CREDIT
Types of Letters of Credit. Banks may issue several types of letters of credits. It is best for importers and exporters to meet with their banking officer to determine which type of credit best suits their needs. The most common types of letters of credits are:

Revocable
Irrevocable
Transferable
Confirmed
Unconfirmed
Back-to-back
Standby
Cash advance against letter of credit

Revocable
A revocable letter of credit allows for amendments, modifications and cancellation of the terms outlined in the letter of credit at any time and without the consent of the exporter or beneficiary. Because this places the exporter at risk, revocable letters of credit are not generally accepted.

Irrevocable
An irrevocable letter of credit requires the consent of the issuing bank, the beneficiary and applicant before any amendment, modification or cancellation to the original terms can be made. This type of letter of credit is commonly used and preferred by the exporter or beneficiary because payment is always assured, provided the documents submitted comply with the terms of the letter of credit. Irrevocable letters of credit can be both confirmed and unconfirmed (See below).

Transferable
An irrevocable letter of credit may also be transferable. With a transferable letter of credit, the exporter can transfer all or part of his rights to another party. Transferable letters of credit are often used when the exporter is the importer's agent or a middleman between supplier and importer, and not the actual supplier of merchandise. With a transferable letter of credit, the exporter uses the credit standing of the issuing bank and avoids having to borrow or use his own funds to buy goods from a supplier. Hence, it is a viable pre-export financing vehicle. Before transfer can be made, the exporter must contact, in writing, the bank handling the disbursement of funds - the transferring bank. Transferable letters of credit can only be transferred based on the terms and conditions specified in the original credit, with certain exceptions. Therefore, it may be difficult to achieve flexibility and confidentiality with this finance method.

The transferring bank, whether it has confirmed the letter of credit or not, is only obligated to effect the transfer to the extent and in the manner expressly specified in the letter of credit. Transferable letters of credit involve specific risks. When a bank opens a transferable letter of credit for a buyer, neither party can be certain of who will be the ultimate supplier. Both parties must rely upon the importer's assessment of the exporter's reputation and ability to perform. To reduce overall risk and prevent the shipment of substandard goods, an independent certificate of inspection can be required in the documentation.

For simplicity's sake, many banks prefer single transfer and discourage multiple transfers, but will do multiple transfers if conditions are right. Partial transfers can also be made to one or several suppliers if the terms of the original letter of credit allow for partial shipments. The processing of this type of letter of credit can become complicated and tricky, requiring logistics coordination and the highest level of precision. Incomplete and/or ambiguous information on the transferable letter of credit almost always leads to problems. Furthermore, the beneficiary of the transferable letter of credit must be available throughout the entire negotiation process to assist the transferring bank.


Other forms of irrevocable letters of credits, though not widely used, are unconfirmed, confirmed and back-to-back.

Confirmed
A confirmed letter of credit is when a second guarantee is added to the document by another bank. The advising bank, the branch or the correspondent through which the issuing bank routes the letter of credit, adds its undertaking and commitment to pay to the letter of credit. This confirmation means that the seller/beneficiary may also look to the credit worthiness of the confirming bank for payment assurance.

Unconfirmed
An unconfirmed letter of credit is when the document bears the guarantee of the issuing bank alone. The advising bank merely informs the exporter of the terms and conditions of the letter of credit, without adding its obligation to pay. The exporter assumes the payment risk of the issuing bank, which is typically located in a foreign country.

Back-to-Back Letters of Credit
Back-to-back letters of credit are two individual letters of credit that together offer an alternative to a transferable letter of credit. The back-to-back letter of credit allows exporters (sellers or middlemen) who do not qualify for unsecured bank credit to use a letter of credit as security for a second letter of credit in favor of a supplier. In other words, if a foreign buyer will issue a letter of credit to an exporter, certain banks and trade finance companies will issue independent letters of credit to the exporter's suppliers so that the required goods can be purchased. Even if the initial letter of credit is not successfully completed, the second remains valid, and the issuing bank is obligated to pay under its terms.

Although back-to-back letters of credit provide small and medium exporters virtually unlimited working capital to finance their sales and complete more export transactions, many banks are reluctant to take on this type of arrangement. Because back-to-back letters of credit involve two separate transactions, it is likely that several participating banks will be involved and the risk of confusion and dispute is high. To protect itself, a bank generally will require that the exporter present all relevant documents that are part of the first letter of credit before issuing the second letter of credit. The second document is worded to conform precisely to the original and dated to expire at some date prior to the first, ensuring that the seller has sufficient time to present documents within the time limits of the first.

Standby Letter of Credit
Unlike a commercial letter of credit, which is basically a payment mechanism, a standby letter of credit is a form of a bank guarantee. It may be used as necessary to cover nonpayment of a financial obligation. A standby letter of credit normally is intended to be drawn on only in the event of nonpayment. The standby letter of credit is issued by the bank and held by the seller, who in turn provides the customer open account terms. If payment is made according to the seller's terms, the letter of credit is never drawn on. However, if the customer is unable to pay, the seller presents a draft, and all other documents as required, to the bank for payment. The standby letter of credit typically expires within 12 months.

Cash Advance Against Letter of Credit
A cash advance against a letter of credit works like back-to-back letters of credit, with the exception that the bank or financing company will issue cash to the suppliers instead of another letter of credit.

 
 . BENEFITS OF THE LETTER OF CREDIT
The letter of credit is the safest, most secure and most convenient settlement method for international transactions. There are a number of advantages both for the seller/exporter and the buyer/importer.

 

   . BENEFITS TO SELLERS
Assures the security of payment from an international bank once the terms of the letter of credit are met.
Seller can determine when payment will be satisfied and ship the goods accordingly.
Bank bears the responsibility of oversight.
Seller does not have to open an account and grant payment terms to buyer. Credit risk is nearly eliminated. The risk of exchange control created with payment delays is greatly reduced.
Provides seller easier access to financing once the letter of credit has been issued.
Once the bank confirms the letter of credit, political and economic risk and questions regarding the buyer's ability to pay are eliminated. The confirming bank is obliged to pay, even if the buyer goes bankrupt, provided the terms of the letter of credit are met.
   . BENEFITS TO BUYERS
Facilitates financing--for example, creating banker's acceptances.
Buyer can confirm that the merchandise is shipped on or before the required date.
It is safer to deal with bank than to prepay.
Buyer may get better terms and prices.
No cash is tied up in the process. Buyer does not have to pay cash up front to a foreign seller before receiving the documents of title to the goods purchased. This is particularly helpful when the buyer is unfamiliar with local suppliers and laws.
Protects the buyer since the bank only pays when the supplier complies with the specific terms and conditions and produces the documents required by the buyer.
The buyer can build safeguards into the letter of credit, including inspection of the goods and quality control, and set production and delivery times.

 

 

The Fastest Way to Buy & Sell EQUIPMENT...Any EQUIPMENT!?

Our 86,000 monthly visitors - Post your offers & requirements For FREE

 

Services & Info. |Become a Member|Add Site|Classifieds|About Us|Contact Us

Terms & Conditions - Copyright 1999-2008, EQUIPMENT.NET, INC. All rights reserved.