Letter of Credit
LCs are employed in international transactions to guarantee the receipt of payment, especially in situations where the buyer and seller may lack familiarity and operate in distinct geographic locations.
We handle two types of Letters of Credit
At Sight
Payment is made immediately, typically within five to ten days, once the seller fulfills the conditions outlined in the letter of credit.
Usance
Also known as Deferred Payment LC, Time LC, or Term LC, this type of letter of credit allows payment at a predetermined time or future date after the submission of conforming documents.
General Ask
- Applicant sends us the pro-forma/sales invoice.
- Global Funding Australia PTY Ltd will create a draft instrument and send a quote to you stating our charges (to be paid in advance).
- Once the draft has been accepted, an indemnity with be sent to you (KYC/AML/due diligence) documents which need to be signed and notarized by a lawyer.
- We also send you a formal invoice for our indemnity process and issuance charges.
- Once our invoice has been paid, along with all indemnity documents, subject to legal and compliance acceptance, we will SWIFT the instrument to the beneficiary's bank.
- Escrow account facilities with a UK third party are also available to assist in settlement of invoices, and we request for a commitment fee along with Escrow administration charges.
- The beneficiary sends the goods to you and the documents to us.
- Once documents have arrived, we have three business days to act on it, after which, if formally accepted, we send you a copy of the documents.
- Upon acceptance of the documents, you will be required to pay the beneficiary. When completed, we send you all the original documents.
- Goods arrive.
Standby Letter of Credit
A standby letter of credit (SBLC) is a payment guarantee issued by a bank on behalf of a client, serving as a 'payment of last resort' in case the client fails to fulfill a contractual commitment with a third party.
Standby letters of credit are established as a gesture of trust in business transactions, providing evidence of a buyer's creditworthiness and repayment capabilities.
The institution issuing the SBLC conducts compliance and brief underwriting procedures to assess the credit quality of the party seeking the letter of credit. Subsequently, notification is sent to the bank of the party requesting the SBLC, typically a seller or creditor.
Crucially, when applying for an SBLC, a business owner demonstrates to the bank their ability to repay the loan. Collateral, such as promissory notes, post-dated cheques, and Escrow deposits, is required to safeguard the bank in the event of default. Additionally, the business owner is obligated to pay an annual SBLC fee, typically ranging from 5-10% of the SBLC value.
General Ask
- Applicant sends us underlying contract (Ex: Sales Contract / pro-forma invoice).
- Global Funding Australia PTY Ltd will create a draft instrument and send a quote with our charges (to be paid in advance).
- Once the draft has been accepted, we send the indemnity (KYC/AML/due diligence) documents which need to be signed and notarised by a lawyer.
- We also send you a formal invoice for our indemnity process and issuance charges.
- Once we receive our charges and all DD checks are completed and approved, along with all indemnity documents, we will SWIFT the instrument to the beneficiary's bank immediately.
- Beneficiary is paid at least 14 days before the expiry date (Up to 2 years from SBLC issue date).