Three legal relationships exist in a letter of credit transaction. First is the contractual relationship between the seller and buyer or the financier and debtor evidenced by a contract for the sale of goods or a contract to lend money. The underlying contract, in addition to creating an obligation of payment or performance, requires the buyer or debtor to arrange for a bank to issue a letter of credit to the seller or financier . Second is the contractual relationship between the bank and the buyer or debtor (the bank’s customer). The customer arranges for the bank to issue the letter of credit in favor of the beneficiary, and the customer agrees to pay the bank for the amounts paid under the letter of credit. Third is the relationship between the issuer and the beneficiary.
This demand for payment is drawn by the seller on the payee. The payee on a letter of credit draft is almost always a bank. For a documentary collection it would be the buyer.
By issuing standby lc in favor of the supplier & on behalf of the buyer, the bank guarantees the payment – even if the company closes down, declares bankruptcy, Sblc Monetization or unable to pay for goods and services provided. Remember, sblc/bg is after all a written obligation of the issuing bank to pay a sum on to a beneficiary on behalf of their customer in the event that the customer himself does not pay the beneficiary. The instrument/ security remains valid during the term before the expiry date.
In other words, the bank offers to stand as the guarantor on behalf of a business customer in a transaction. Most bank guarantees carry a fee equal to a small percentage amount of the entire contract, normally 0.5 to 1.5 percent of the guaranteed amount. Bank guarantees are not limited to business customers; individuals can apply for them as well. However, businesses do receive the vast majority of guarantees. In most cases, bank guarantees are not particularly difficult to obtain.
Also, you can renew the sblc 15 days prior to the expiration date. So, it saves you more money and time in doing repeat business. We will review the trade deal between the buyer / seller. After doing the careful study, we will inform the buyer about our approval of their mt760 request. At first, the buyer submits their sblc request by sending their sales and purchase agreement or proforma offer of their trade deal. Whether you need to do import/export or secure your trade, bronze wing trading can help you.