Letter of Credit
- Home
- Letter of Credit
Letter of Credit Process
At Bronze Wing Trading Ltd, we guide businesses through each stage of the LC process, from reviewing transaction details to coordinating the required documentation and issuance procedures.
- The buyer provides details of the transaction, including the sales agreement, purchase agreement, or proforma invoice, allowing our team to understand the trade requirement.
- Our team reviews the deal structure, transaction details, and documentation to evaluate the requirements and confirm the next steps.
- Once the request is approved, we provide the service agreement along with the required details to begin the transaction process.
- After completion of the agreement and required payments, our team begins structuring the Letter of Credit and prepares the LC MT700 draft for review and approval.
- Once the LC draft is approved and the required issuance process is completed, the Letter of Credit is issued through the relevant banking channels in favour of the seller.
Submit Your Trade Finance Requirements
Get a FREE Quote from us within 24 hours
Irrevocable Letter of Credit
Latest Transaction
LC at Sight Issued to Facilitate Rice Import
A South African buyer needed to import 10,000 MT of IR 64 rice from a supplier in Pakistan, so we stepped in and issued an LC at Sight from one of our leading banks in Europe, with zero collateral and no cash margin required. That LC helped the buyer and supplier close the deal successfully.
Amount:
350,000
Instrument:
LC at Sight
Validity
90 Days from Issuance
Are You Looking to Open LC at Sight?
What is Letter of Credit?
A Letter of Credit is a financial instrument issued by a bank that provides payment assurance between a buyer and seller involved in an international trade transaction. For buyers, it helps establish trust with suppliers by demonstrating their commitment to complete the payment. For sellers, it provides confidence that payment will be received once the agreed conditions and required shipping documents are fulfilled.
In global trade, businesses often deal with unfamiliar partners, different regulations, and cross-border challenges. A Letter of Credit helps reduce these uncertainties by creating a secure payment structure supported by a recognised banking institution. Whether, it is an Import LC, LC at Sight, or MT700 Letter of Credit, each solution is structured based on the requirements of the transaction. Once the agreed terms are met, the issuing bank facilitates payment according to the conditions outlined in the Letter of Credit.
For businesses involved in international trade, a Letter of Credit provides a reliable way to strengthen supplier relationships, manage payment risks, and complete transactions with greater confidence.
Why Importers and Exporters Would Opt for LC Payment Term?
In international trade, both buyers and sellers need a payment method that provides security and confidence throughout the transaction. A Letter of Credit creates a structured payment arrangement where banks act as trusted intermediaries between both parties.
For Importers / Buyers:
- Allows buyers to purchase goods without making advance payments before shipment.
- Provides confidence that payment will only be released after the agreed terms and documents are fulfilled.
- Helps buyers establish trust with international suppliers, especially when dealing with new business partners.
- Provides a structured payment process that supports better cash flow management.
For Exporters / Suppliers:
- Ensures payment security once the required shipping documents comply with the LC terms.
- Reduces concerns related to buyer reliability and international payment risks.
- Helps exporters build stronger relationships with overseas buyers.
- Provides a recognised banking structure that supports smoother trade transactions.
- Can help eligible exporters access financial support options to manage their shipments.
Open LC at Sight at ZERO Collateral
Parties Involved in Import LC
An Import Letter of Credit involves multiple parties working together to create a secure payment structure between the buyer and seller. Each party has a specific role in ensuring the transaction is processed smoothly.
01
Applicant
The buyer who requests their bank to issue the Import Letter of Credit in favour of the supplier for the purchase of goods or services.
02
Beneficiary
The supplier or exporter who receives the Letter of Credit and is entitled to payment once the required terms and conditions are fulfilled.
03
Issuing Bank
The bank that issues the Letter of Credit on behalf of the buyer and provides the payment commitment according to the agreed LC terms.
04
Advising Bank
The bank that receives the LC from the issuing bank and communicates it to the beneficiary after verifying its authenticity.
05
Supplier's Bank
The seller’s banking institution that receives the LC and assists the beneficiary with the document submission and payment process.
Steps We Follow in the Letter of Credit Process
The buyer provides the required transaction details, including the sales agreement, proforma invoice, product information, payment terms, and other relevant documents.
Our team reviews the trade structure, transaction details, and documentation to understand the requirements and determine the suitable approach.
Once the deal is reviewed and approved, we proceed with the next stage and provide the required documentation to begin the process.
We structure the Letter of Credit based on the agreed transaction terms and prepare the MT700 draft for review and confirmation.
The supplier reviews the Letter of Credit draft and confirms that the terms match the agreed sales agreement or proforma invoice.
After confirmation, the supplier arranges shipment of the goods and prepares the required shipping documents according to the LC terms.
The supplier submits the required documents through their bank. The documents are reviewed to ensure compliance with the Letter of Credit conditions.
Once the documents meet the required terms, the issuing bank processes the payment according to the Letter of Credit agreement.
After completion of the payment process, the original shipping documents are released to the buyer, allowing them to collect the goods.
With a simple process, Import LC gives assurance that suppliers will get paid. Apply for Letters of Credit online and start importing goods from overseas!
Types of Letter of Credit
Type 01
Irrevocable Letter of Credit
An Irrevocable Letter of Credit cannot be cancelled, modified, or withdrawn by the issuing bank without the agreement of all involved parties. It provides greater certainty to both buyers and sellers throughout the transaction.
Type 02
Transferable Letter of Credit
A Transferable Letter of Credit allows the original beneficiary to transfer the credit facility to another party, such as a supplier or manufacturer involved in fulfilling the transaction. It is commonly used when intermediaries are involved in international trade.
Type 03
Confirmed Letter of Credit
A Confirmed Letter of Credit includes an additional guarantee from another bank alongside the issuing bank. This provides extra payment assurance, especially when the seller requires additional confidence in the transaction.
Type 04
Unconfirmed Letter of Credit
An Unconfirmed Letter of Credit relies only on the commitment of the issuing bank and does not include an additional confirmation from another financial institution.
Type 05
Letter of Credit at Sight
An LC at Sight allows the seller to receive payment once the required documents are submitted and verified according to the Letter of Credit terms. It provides a faster payment structure compared to deferred payment arrangements.
Type 06
Usance Letter of Credit
A Usance Letter of Credit allows the buyer to make payment at a future agreed date rather than immediately. The supplier ships the goods according to the LC terms, and payment is made after the agreed credit period.
Type 07
Back-to-Back Letter of Credit
A Back-to-Back Letter of Credit involves using one Letter of Credit as security to arrange another LC for a supplier. It is often used by intermediaries who need to purchase goods from suppliers while fulfilling an existing buyer order.
Letter of Credit Cost
Issuance Fees
Negotiation Fees
Swift Charges
Letters of Credit cost mainly includes issuance fees, negotiation fees, and swift charges. These fees are borne by the buyer, or as per the agreed terms between buyer and supplier, and this has to be stated in the issued MT700.
We are a Letter of Credit Provider from Rated European Banks. We act on behalf of buyers who don’t have enough funds to open the LC, to import their required goods.
Submit your requirements today and get the LC issued in 48hrs!