A Letter of Credit is a written undertaking issued by a bank guaranteeing the buyer’s payment towards the seller. It is also called irrevocable LC, Import LC, LC at Sight, LC MT700, DLC MT700. This is to assure the seller that they will receive the payment for the supply of goods, once they submit the shipping documents. Due to the nature of global trade dealings & its risks factors including distance, different laws in each country, and trust issues between the traders, the use of LC has become a vital part of global trade. When a buyer & a seller from two different parts of the world decided to do business, there might be uncertainty in trust and payment will arise. To bridge the gap between the traders & to build trust, LCs are being used. Usually, DLC MT700 & LC at Sight which is valid for 90 days and 180 days are always irrevocable. It means a bank provides an irrevocable commitment to the seller, that they will get paid if they comply with the terms stated in the issued Irrevocable LC. Also, it assures that if the buyer is unable to make the payment or went bankrupt, then the bank will be liable to fulfill the payment terms as agreed in the contract. Hence this is an irrevocable commitment made by the bank, LCs are mostly preferred by buyers and sellers, as a Payment Term in International Trade.

How Does a Letter of Credit Work?

When it comes to global trade, buyers run the risk of not receiving goods from the supplier for which they have already paid. On the other hand, sellers run the risk of nonpayment by the buyer for the supplied goods. Hence, in this case, the traditional payment method used earlier for global trade has failed. So, the International Chamber of Commerce (ICC) introduced MT700 to secure the interests of both parties involved in trading. While using LC Payment Term, the buyer’s bank assures to pay the seller for the supplied goods; upon complying with all terms & the submission of documents as stated in the issued DLC. In case, if the seller fails to submit the documents before the deadline, the LC will be expired. Then the bank will return the funds to the buyer’s bank account which they deposited while LC Opening. Hence, this way, the risk of non-payment & the non-delivery of goods goes down to zero percent.

Documents required for a Letter of Credit

To open a Letter of Credit on behalf of your company at ZERO Collateral, you need to arrange the following documents:-

• Signed Copy of Proforma Invoice or Sales and Purchase Contract of your Trade Deal
• Company Registration or Trade License
• MOU between partners (if any) along with Company Ownership Document
• Passport Copy of the Authorized Signatory
• Authorized Signatory’s Residence or Company Utility Bills as Address Proof
• Past 6 Month Bank Account Statement Copy

Once all these documents are received from your end, we will start work with our bank to structure your DLC transaction.

Parties Involved in LC Issuance

In general, the following are the parties involved with Letters of Credit. Here’s what each party role and what it does:-

1. Applicant: The Applicant or the buyer who requests the bank to issue the DLC MT700 in favor of their supplier.
2. Issuing Bank: The bank who issues the MT700 on behalf of their customer, called LC Issuing Bank.
3. Beneficiary: The supplier who receives the MT700 in their bank account, called LC Beneficiary.
4. Advising Bank: The advising bank receives the MT700 from the issuing bank and advises the LC towards the seller’s bank.
5. Negotiating Bank: The seller’s bank who receives the LC works also as a negotiating bank on their client’s behalf.

Letter of Credit Benefits

Not just the importer, but the exporter also gains lots of benefits by using Import LC as a payment term. And it includes:

For Exporter

• The buyer can’t cancel or alter an order without the approval of the seller. Hence, the production risk becomes zero.
• The buyer’s bank has the obligation to pay for the shipped goods.
• The buyer can’t refuse to pay for the supplied goods, as long as, the seller complies with the terms of credit.
• Payments are secured; if the buyer opts for a deferred payment.

For Importer

• The bank is liable for the payment of goods or services on a precondition. If the seller would provide all the documents required, according to the terms of MT700.
• Through an LC, the importer is indeed proving their solvency.
• In most cases, the buyer is able to control the shipping of goods.
• If the seller provides a deferred payment option, it means that the seller has been granted a credit period for the payment.
• Pre payments become negligible under import LC.

Types of Letter of Credit

Irrevocable Letter of Credit

This type of Letters of Credit cannot be amended or changed without the consent of all parties involved. Most of the traders prefer Irrevocable LCs. This is because Irrevocable LC gives the security that most suppliers want.

Transferable LC

As it indicates, this can be transferable to the principle supplier upon request of the 1st beneficiary. This is because, in some cases, the first party is playing the role of a middle party under this type of Letters of Credit.

Confirmed LC

In some cases, sellers may not trust issuing bank that provides LC on behalf of the buyer. Hence, they might require a bank in their home country to confirm the LC.

LC at Sight 60 Days / LC 90 Days After Sight

This type of LC is commonly used in domestic and global trade. Also, this guarantees that the bank will release the payment; once the seller submits all the documents as mentioned in the credit.

Back to Back Letter of Credit

This type of Letter of Credit Back to Back normally issues against the Master LC. This is to say, here, at first, the LC opened in favor of an exporter from an importer’s bank. Then, on the basis of the Master LC and the credit facility available in the exporter’s account. Further, the exporter’s bank will open a new LC, in favor of their principal seller.

Letters of Credit Cost

The cost of Letters of Credit may vary based on the amount & its tenure. Usually, the cost may include bank commission, processing fee & swift charges. Further, the cost is borne by the Applicant (buyer). Also, it should be clearly stated on the issued LC. For more info on the Cost, Contact us.

Letter of Credit Providers

Steppe Group L.L.C., the Letter of Credit Providers in xDubai provides DLC MT700 on your behalf without any cash margin. By offering LC from rated banks, we help traders who do not have enough facilities in their bank account to conclude their trade. If you are looking for a secure, easy, and reliable way to get MT700 to conclude your trade, Fill up the Form Available Here! We can provide you the required

What is the Purpose of Letter of Credit?

Letters of Credit is a tool for minimizing the risk involved in International Trade. Letter of Credit is defined as a written undertaking issued by banks on behalf of their clients to assure the seller that they receive the payment upon the submission of shipping documents, as stated in the issued LC. In this blog, let us explain the Purpose of Letters of Credit.

What is LC Used for?

When a buyer & seller from two different parts of the world are going to deal with each other, there may be a chance for trust issues. This is because – suppliers will not be ready to supply the goods without getting some kind of advance payment, as they don’t have any assurance on whether the buyer will pay for the supplied goods or not. On the other hand, the buyer will not be ready to make the payment without knowing that whether the supplier will supply the goods or not. So, here comes the importance of using Letters of Credit. In international trade transactions, LC MT700 bridges the trust issues between the buyer and seller, especially when they are unknown to each other.

Main Purpose of Letters of Credit for Buyers and Sellers

Letters of Credit assist both buyers and sellers to do global trade transactions in a safe and secure way. Let us see how it helps buyers and sellers with their trade transactions.
For importers – Using a Letters of Credit ensures the seller that you will make the payment, only after the supplier submitted the proof that they have shipped the products as agreed in the contract. Further, by doing so, it allows you to conserve your cash flow, as you don’t want to pay your seller instantly and this will help you to invest your money in other businesses. Also, since you don’t have to make any advance payments or deposits to the seller, you can conclude your deals without facing any issues. Also, LCs acts as a certificate to prove your credibility & financial ability in making the payment.
For exporters – Accepting LC as payment terms will act as a safety net for you. That is, in case, if the buyer fails to pay for the goods you shipped, then you can claim the LC to the buyer’s bank to get the payment for the supplied goods. But to be noted that you’re entitled to get the payment, as long as you have met the delivery conditions and submitted the documents as stated in the issued LC.

How to Apply Letter of Credit?

Have you decided to use Letters of Credit for your import & export needs? So, how you will open the LC at Sight? If you’re looking to get the LC from well-reputed banks at ZERO Collateral, you can always contact us with your DLC request! Being the LC Providers in Dubai, we can assist you with your DLC transaction and will help you to get the DLC MT700 issued in just 2 days!

LC Payment Terms – How to Get LC at Sight with NO Collateral?

Are you a trader who actively imports goods from overseas and supplies it to the local market? Have you kept your trading business under hold due to financial crunches? Be ready to kick start your import-export business by using LC Payment Terms. Further, this video talks about “How to Open Letter of Credit at ZERO Collateral” Watch the video given or read the blog now to learn the Letter of Credit Process to open MT700 on behalf of your company.

What are LC Payment Terms?

LC Payment, the most popular payment method used in international trade transactions, as the buyers and sellers involved in trade transactions mostly prefer to use LC Payment Terms to conclude their imports. An LC is a commitment made by a bank on behalf of the buyer to ensure the supplier that the payment will be made; once the terms and conditions stated in the issued LC are fulfilled. Having LCs gives confidence to the buyer that the payment will be made to the seller, only after the successful delivery of goods as agreed in the contract. Further, this also assures the supplier that they will receive the payment, even in case of buyers default.

How to Get LC Payment Term?

Since LCs are the financial instruments, the banks use the buyer’s financial assets available with their banks to open the required MT700. In case, if they face a lack of credit facilities or are unable to provide a cash margin, then they can’t able to avail the DLC issued from their bank.

Simple 5 Step Process to Open LC in 2 Days

Here comes the importance of getting help from private trade finance providers. Further, if a client faces a lack of cash funds or bank facilities; let they can contact us with their LC request, then we will:

• Firstly, analyze and then, approve their LC request.
• Next, we will ask them to sign the service agreement with us; also, pay the admin charges to initiate the LC request with our bank.
• And then, we will send the Letters of Credit draft for the client’s approval. Further, the client will check the LC draft and verify with their supplier whether they can be able to comply with the LC terms mentioned in the draft. Finally, the client will convey their draft approval to us.
• Further, after the LC draft approval, we will inform the client to pay the LC issuance fee charges to proceed with the MT700 issuance.
• Finally, once the issuance fee charges are paid, we will instruct our bank to issue the DLC from our bank account on behalf of the buyer and in favor of the seller.

From this step-by-step process, you may come to know the fact that – We use our own credit facilities available in European Banks to open DLC on behalf of the buyer. So there is no need to provide a cash margin to avail DLC from well-rated banks

How to Open LC – LC Payment Term?

If you’re looking to open Letters of Credit – DLC MT700 – LC at Sight to import goods from overseas; then submit your request to us & get the MT700 issued without collateral!

Letter of Credit in International Trade – LC Process – LC Providers

Letters of Credit are considered to be a very reliable payment option for those who are doing global trade. Since global trading is associated with numerous risks, traders often use LCs to secure their trade transactions. Here, this video talks about Letters of Credit and the process to avail DLC MT700. While doing business globally, exporters may have the risk of non-payment by the buyer. On the other hand, importers may face the risk of not receiving the goods for which they have already paid. This is where Letters of Credit come into effect to secure the trade deals.

Letters of Credit in International Trade

Letters of Credit, the written undertaking issued by a bank acts as a payment assurance. Further, availing DLC MT700 ensures that the supplier will receive the payment for the supplied goods, as long as they comply with the T&Cs of the issued MT700. When it comes to global trading, LCs offer security for both the buyer and the seller, because the trade will be commenced upon the security of banks to ensure that payment is received and goods are shipped.

How to Open LC – Letters of Credit

Are you looking to open DLC on behalf of your company? We, the LC providers in Dubai assist traders by providing LCs from our European Bank Account. Follow the Simple LC Process to Open LC from us.

• Submit your MT700 requirements to us.
• Further, we will analyze your trade deal and approve your transaction, if you’re eligible to proceed further.
• And then, you need to sign the service agreement with us and need to pay the service charges to start our work on your DLC transaction.
• Further, our team of trade finance experts will structure the LC and send the LC draft for your review.
• After the draft approval and receipt of DLC issuance fee charges, we will forward your LC request to the bank. Then, we instruct them to issue the required DLC from our European Bank Accounts.

That’s it! Your supplier will receive the DLC MT700 within 2 banking days! Have you decided to open LC at Sight to conclude your imports? As mentioned before, our LC Application process is very simple! To start work with your LC transaction, submit your LC request to us now! We will structure your LC & issue the LC from European Banks in just 2 days!