Documentary Letter of Credit
With the Tatra banka documentary Letter of Credit you can minimize the risks associated with a business relationship especially with an unfamiliar business partner and in a higher-risk area.
A suitable security and payment tool for your business
Possibility to finance an export Letter of Credit
Uniform legal regulations issued by the International Chamber of Commerce
- A suitable security and payment tool that minimizes the risks associated with a business relationship, especially with an unfamiliar business partner and in a higher-risk area.
- The issuance of a Letter of Credit in favor of the seller enables you to negotiate more favorable conditions with your business partner for the commercial contract (e.g. deferred invoice maturity).
- Payment by the buyer is guaranteed by the bank, i.e. the seller has a receivable towards the issuing bank rather than the buyer.
- It ensures the buyer that payment will be made only upon fulfillment of all the conditions prescribed by the Letter of Credit.
- If the seller's bank confirms the Letter of Credit, the seller will be released from the risk of the buyer’s failure to pay.
- By appropriate documents the buyer can put pressure on the seller to make the delivery on the set deadline and in the required quality.
- The bank may purchase the seller’s receivable from the export Letter of Credit (with deferred maturity), which means a shorter maturity for the seller.
- In the case of letter-of-credit transactions, the legal relationships between the buyer and the seller are governed by the Uniform Customs and Practice for Documentary Credits published by the International Chamber of Commerce in Paris.
A Documentary Letter of Credit
Is a bank’s irrevocable written obligation to the supplier of goods or services to pay a certain financial amount according to the Letter of Credit conditions, provided that the recipient of the Letter of Credit (authorized supplier) furnishes the documents set forth in the Letter of Credit conditions.
Use of Letter of Credit
The documentary Letter of Credit is usually used by an exporter or importer in transactions where documents are to be furnished that guarantee the ownership title to the goods or their quality, etc. The Letter of Credit may also be used in trading in real property, securities, share transfers, i.e. in cases where a bank's pledge for payment is required.
Types of Letter of Credit
Export Letter of Creditif you are in the position of a seller (exporter) you will receive via Tatra banka a Letter of Credit issued in your favor by the buyer's bank (importer). By confirmation of such Letter of Credit upon request Tatra banka, after consideration, takes the risk of the consequences of non-payment on the part of the issuing bank (assuming acceptance of documents in line with the Letter of Credit conditions),
Import Letter of Creditif you are in the position of a buyer Tatra banka will, upon your request, issue a documentary Letter of Credit in favor of the seller,
Real Estate Letter of Creditused to purchase or sell real property, usually in Slovakia,
Stand-by Letter of Credita function similar to a guarantee. It is suitable mainly for repeated deliveries under one contract. This type of documentary Letter of Credit with the nature of a guarantee is used mainly in the USA where the issuance of bank guarantees of the European type is not permitted by law,
Transferable Letter of Creditthe rights from the Letter of Credit may be transferred by the original beneficiary to another person. It is suitable for dealers/mediators.
Purchase of receivables
For our long-standing clients we purchase receivables from documentary Letters of Credit with maturity deferred from 30 to 360 days following the acceptance of the documents by the issuing or confirming bank.
In this way Tatra banka ensures for the exporter faster access to funds than a client can 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 for issuance of a Letter of credit:
- duly filled in documentary Letter-of-Credit application signed by the client’s authorized representatives,
- a copy of the contract, order, pro-forma invoice,
- an agreement between Tatra banka and the client on acceptable hedging of Tatra banka’s liability on the part of the client.
Conditions for purchase of receivables from the Letter of Credit:
- Signing a framework agreement on purchase of yields from documentary Letters of Credit,
- Letter of Credit issued by an acceptable bank,
- acceptance of documents by the issuing/appointed bank.