When you are making an investment, importing or buying in significant quantities the person on the other side of the transaction wants to be sure you have the funds to complete the deal. Generally when parties with no prior working relationship want this type of confirmation they request a financial letter of credit. Los Angeles banks, financial institutes and capital funds businesses can provide these letters to facilitate the transaction.
A Step Beyond
However, financial letters of credit go beyond just showing proof that the funds exist. They also provide a guarantee that the bank or financial institute that issued the letter will cover the payment on the interest and principal in the event that the buyer fails to complete the sale. With this assurance the seller, providing specific pre-set requirements are met, will not have any risk with the transaction as payment is guaranteed by the bank.
In different types of transactions the financial letter of credit can also be used to avoid the cost and time required to do a background check on a buyer which could take days and weeks.
Getting a Financial Letter of Credit
It is important to apply in advance for a financial letter of credit. Los Angeles financial institutes and funding companies may require several days to process you request. In addition they will require information about the specific contractual agreement that you have with the other party.
The letter will outline the specific terms of the agreement that the bank agrees to guarantee, along with any specified conditions. It will also ensure that the seller or exporter is not provided with the funds for payment until shipping confirmation or other required documentation is provided as per the terms contained in the letter.
Financial letters of credit by Los Angeles financial firms are regulated by the rules and regulations put forth by the International Chamber of Commerce. This allows all financial institutes and parties to have a clear understanding of the terms and conditions outlined in the letter. It also sets forth a uniform understanding of the terms contained within the letter, making it a valuable document in any large transaction.
