A Documentary Letter of Credit is the bedrock of secure international trade, providing a reliable payment mechanism that protects the interests of both the buyer (Importer) and the seller (Exporter). Governed by the globally accepted Uniform Customs and Practice for Documentary Credits (UCP 600), an LC replaces the commercial risk between trading partners with the creditworthiness of a bank.
At Firmroot Capital, we specialize in facilitating LCs that are structured to ensure clarity, compliance, and security, allowing our clients to trade across borders with absolute confidence.
The process is designed for maximum security:
Sales Agreement: The importer and exporter agree on terms, specifying payment via LC.
LC Application: The importer applies to their bank (the Issuing Bank) to issue an LC in favor of the exporter.
Issuance & Advising: The Issuing Bank sends the LC to a bank in the exporter's country (the Advising Bank), which authenticates it and informs the exporter.
Shipment & Presentation: The exporter ships the goods and presents the required documents (e.g., Bill of Lading, Commercial Invoice) to their bank.
Document Examination & Payment: The banks meticulously examine the documents for compliance with the LC terms. If compliant, the Issuing Bank releases payment to the exporter.
We can structure various types of LCs to meet your specific needs:
Sight LC: Payment is made as soon as the compliant documents are presented.
Usance LC / Deferred Payment LC: Payment is made at a specified future date after the documents are presented, providing the importer with a credit period.
Confirmed LC: A second bank (the Confirming Bank) adds its guarantee of payment, providing an extra layer of security for the exporter, especially when dealing with high-risk markets.
Transferable LC: Allows the original beneficiary (exporter) to transfer all or part of the credit to another party, such as their direct supplier.
For the Exporter: Mitigates the importer's credit risk and ensures payment upon meeting the terms.
For the Importer: Guarantees that payment will only be made after the exporter has shipped the goods and provided proof via the required documents.
For Both: Establishes clear terms, dates, and conditions, reducing the likelihood of commercial disputes.
Our team at Firmroot Capital possesses deep expertise in navigating the documentary requirements of LCs, ensuring a smooth and efficient process from issuance to payment.
