Documentary Credits

Also known as Letters of Credit (LCs) these provide one of the safest and most versatile payment mechanisms of International Trade. Short of payment in advance LCs are the surest way of obtaining payment for goods exported provided that the terms and conditions of issue are adhered to.

A quick glance

• Facilitates doing business with new or unfamiliar trading partners
• Secure
• Issued to meet with ICC - Uniform Customs and Practice standards for documentary credits
• Irrevocable (unless there is agreement to revoke by all parties)

For the importer a Letter of Credit offers:

• a conditional bank guarantee of payment to the supplier, therefore it may help you to negotiate better terms
• international acceptance
• deferred payment when issued at term and therefore can ease pressure on cash flows
• additional protection when an importer requires specialised documentation such as inspection or quality certificates issued by a third party

For the exporter a Letter of Credit offers:

• a guarantee of payment as long as the seller can present documents required
• Lombard’s authentication of the Letter of Credit issued by the buyer’s bank
• the possibility to have Lombard add its own confirmation thereby eliminating certain risks
• the possibility to raise finance on the strength of the Letter of Credit