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Yield 4 Finance > Our Services > Documentary Letter of Credit

Documentary Letter of Credit

A documentary letter of credit is a guarantee that provides assurance to the beneficiary that he will get the payment which has been mentioned in the documentary letter of credit. There is a condition that the compliant presentation should be under the documentary letter of credit. This documentary letter of credit is commonly used for international transactions where both the buyer and the supplier have a new relationship and operate from different countries.

A documentary letter of credit is a really crucial financial instrument for meeting the short-term needs. It enables the recipients for obtaining the important credit for financing the project. The recipients hope of getting sufficient return for settling the due amount in the provided time frame.

The documentary letter of credit showcases the documents and information that are needed by the beneficiary on presentation which includes the expiry information like date and time of the letter. The compliant presentation is a kind of guarantee given to the beneficiary by the documentary letter of credit for in order to get paid. The only criterion is that the delivery conditions should be met.

It is the responsibility of the bank that writes the letter of credit on the applicant’s behalf to ensure that the terms and conditions which are required for documentation purposes under the credit are met duly before any amount is paid to the supplier. Documentary letter of credits come under the governance of the International Chamber of Commerce (ICC) rules. These rules for the letter of credit are known as Uniform Customs and practice for documentary Credit (UCP). The current version which is in effect is the UCP600 from July 1st, 2007. The concerned parties to a documentary letter of credit are the issuing bank and the beneficiary.

In these cases the credit worthiness of the issuer stands in place of the credit worthiness of the buyer – giving the supplier greater comfort that he will be paid.

Issuers for USANCE LC

Calls for limits and restrictions. Please ask for each bank restrictions and line limits:
  • Sigma Financial Solutions
  • Micro Capitals Bank
  • Acumen Bank
  • United Trust Bank

Procedure

Issuance Procedure:

We need the following documents/ information for finalising the draft –

  1. Filled in application form
  2. Verbiage required in the instrument for SBLC & BG / Pro-Forma Invoice for DLC
  3. Trade license of your company
  4. Share Holders List
  5. Passport copy of main applicant
  6. Last Three years audited balance sheet
  7. Last Six months latest bank statements

 

Step-wise

  1. After acquiring all the above documents / information, we will select the issuing bank / financial institution and finalise the draft for your review.
  2. Upon receiving the draft copy of the instrument, you must thoroughly review the draft for any corrections, additions or removal of information. Should there be any amendments, we can amend the draft accordingly to match your preferences. Once the draft is approved, you will need to send us a copy of the draft with sign and stamp on it as your approval.
  3. We will raise the invoice for the agreed charges (charges include margin money, processing fee and professional charges) and you will make the remittance against the invoice.
  4. Only after we receive the payment for the raised invoice, the Issuing Bank / Financial Institution will issue and relay the instrument through swift within 48-96 hours after remittance.
  5. Simultaneously we will send you the issued copy through email for your reference and record.

 

Note:  The charges will depend on the value of the Financial Instrument, Tenure, Issuing Bank / Financial Institution.

Application Form

Sr. No. Title Download
1. DLC Application Form

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