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Tatra banka

26.9.2016 02:12

Documentary Letter of Credit

Using Letter of Credit by Tatra banka you can minimise the risks from
a business relationship especially with unknown business partner
or with countries with increased political or economical risk

  • powerfull security and payment tool
  • enables you to negotiate more favourable
  • conditions of the commercial contract 
Advantages

Advantages

  • it minimises the risks from a business relationship especially with unknown business partner whose payment discipline is unknown to you or partner´s company is incorporated in the country with increased political or economical risk
  • powerfull security and payment tool in a period of reduced liquidity (for instance during the crisis)
  • the issuance of Letter of Credit in favour of the seller enables you to negotiate more favourable conditions of the commercial contract against the business partner (e.g. longer payment terms)
  • payment of the buyer is guaranteed by the bank, i.e. the seller´s receivable arises towards the issuing bank and not to the buyer
  • it ensures to the buyer that payment will be effected only upon the fulfilment of all conditions required by the Letter of Credit
  • if the seller's bank confirms the Letter of Credit, the seller shall be released from the risk of non-payment by the buyer´s bank
  • by appropriate required documents the buyer motivates the seller to make the delivery within agreed period and in the required quality
  • the bank may purchase the seller's receivable from the export Letter of Credit with deferred maturity date (i.e. speeding up the seller's cash flow)
  • the legal relationships between the buyer and the seller by Letter of Credit are governed by the Uniform Customs and Practice for Documentary Credits issued by International Chamber of Commerce in Paris
Details

Details

A Letter of Credit is a bank's irrevocable written undertaking to the supplier of the goods or services to pay a determined amount of money according to the Letter of Credit conditions, provided that the recipient (seller or beneficiary) of the Letter of Credit shall present the documents set forth in the Letter of Credit conditions.

Use of Letter of Credit

The Letter of Credit is usually used by an exporter (beneficiary) or importer (applicant) in transactions where documents are to be submited e.g. documents which guarantee the ownership title to the goods, the quality thereof, etc. The Letter of Credit may also be used in trade with real estates, securities, share transfers, i.e. in cases where a bank's undertaking for payment is required.

Letter of Credit process

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Click on the first item to start. Bussiness contract is concluded between seller and buyer with payment condition Letter of Credit. Buyer / Applicant applies to his bank for LC issuance. Based on LC application issuing bank opens LC in favour of Seller / Beneficiary through his bank. Advising bank will advise resp. also confirm LC to the Seller / Beneficiary. Seller / Beneficiary delivers goods to the Buyer / Applicant. Seller / Beneficiary prepares documents required under LC and presents them to the advising / confirming bank. Bank will check the documents and send them to the issuing bank. Provided received documents fully comply with LC the issuing bank will pay to the Seller / Beneficiary as per his instruction. Documents will be handed over to the Buyer and his account will be debited.
L/C types

L/C types

We offer the following types of Letters of Credit:

1. export Letter of Credit - you are in the position of a seller (exporter) and you will receive via Tatra banka a Letter of Credit issued in your favour by the buyer's bank on behalf of the importer. By confirmation of such Letter of Credit upon request, Tatra banka takes the risk of non-payment of the issuing bank (assuming receipt of documents in accordance with the Letter of Credit conditions).
2. import Letter of Credit - you are in the position of a buyer and Tatra banka will, upon your request, issue a Letter of Credit in favour of the seller.
3. real estate Letter of Credit - used for the purchase or sale of real estate usually in Slovakia.
4. stand by Letter of Credit - has similar function as a guarantee. Suitable mainly for repeated deliveries under one contract. This type of Letter of Credit with the nature of a guarantee is used mainly in the U.S.A. where the issuance of bank guarantees of the European type is not permitted by law.
5. transferable Letter of Credit - the rights from the Letter of Credit may be transferred by the original beneficiary to another person. It is suitable for traders/middlemen.

Tatra banka offers consultancy concerning Letters of Credit already at the stage of preparation of your commercial contract.

Letter of Credit discounting

Letter of Credit discounting

Letter of Credit discounting

For our stable clients we discount Letters of Credit with deferred maturity from 30 to 360 days after acceptance of documents by the issuing or confirming bank.

We thus enable the exporter faster access to funds than the exporter would otherwise have with the standard processing of a Letter of Credit with deferred maturity (payment usually within 10 working days upon the submission of documents required by the Letter of Credit).

Conditions

Conditions

Letter of Credit issuance conditions:

  1. duly filled in Letter of Credit application signed by the client's authorised representatives
  2. extract from the Commercial Register (not older than 1 month)
  3. copy of contract, order, pro-forma invoice
  4. agreement between Tatra banka and the client on an acceptable security of Tatra banka´s liability 

 

Conditions of the Letter of Credit discounting:

  1. signing a framework agreement on Letters of Credit discounting
  2. extract from the Commercial Register (not older than 1 month)
  3. acceptance of documents by the nominated bank