About letter of credit
Letter of credit (L/C) gives securance for both transaction partners – exporter and importer. The seller has guaranteed payment in exchange for agreed documents, confirming that the goods have been shipped or services have been provided meanwhile the buyer receives a guarantee that the seller will not receive the payment, if goods or services are not provided in accordance the L/C.
This service is beneficial in case you have a new international business partner or if your cooperation partner requests this type of transaction. L/C is a separate transaction, independent of trade or other agreements – all banks involved in the L/C transaction are working only with documents, not goods or services that these documents refer to. L/C can differ also with the form of payment – you can choose the most appropriate payment for your transaction.
Are you the seller (exporter)?
- The L/C is opened by the buyer and sent to your (seller’s) bank, who will advise it to you. You have to check whether the terms are acceptable.
- You will receive the payment for goods on time. After submitting agreed documents to the bank, the buyer’s bank will pay you the amount specified in your L/C.
- You will be able to manage the company financial flow better. You can offer the buyer to use the deferred payment and the bank can offer you the discounting of the payment.
- L/C can be confirmed to cover issuing banks payment risk.
Are you the buyer (importer)?
- Possibility to avoid advance payments.
- You get the goods at the agreed time and the seller must also fulfill all other contractual conditions according to L/C in order to get the money.
- If you use the L/C for a payment, you can apply for a loan from the bank.
- The seller can improve buyer’s working capital by L/C with deferred payment
- In cooperation with Altum we offer the option to get additional collateral (guarantee) to companies that need to increase the access to financing solutions.
Title
How does letter of credit work?
Description
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The buyer and the seller enter into a purchase and sales transaction agreeing to use the L/C for a payment.
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The buyer submits an application to their bank to issue the L/C under the conditions agreed with the seller.
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The buyer’s bank makes a decision regarding the issuing of the L/C, based on the latter’s reliability and forwards issued L/C to the seller’s bank.
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The seller’s bank advises the seller of the L/C issuance and the latter checks the compliance of its terms and conditions.
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The seller ships the goods to the buyer as agreed and presents the documents required in the L/C to their bank.
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If the documents are in compliance with the terms and conditions of the L/C, the seller’s bank will forward them to the buyer’s bank which will make a payment against the documents. Once the seller’s bank receives the money, it will transfer it to the seller.
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The buyer pays their bank and in return receives the documents accompanying goods.
Simple steps for the buyer to apply
1.
Register for consultation
2.
We will contact and advise you
3.
Send the filled application to info@seb.lv
4.
After a positive decision, sign the agreement if necessary
Letter of credit line1
| Service | Fee |
|---|---|
| Processing of the Letter of credit line/its amendments | By agreement |
Import letters of credit
| Service | Fee |
|---|---|
| Issue of the Letter of Credit | 100.00 EUR |
| Issuance of a letter of credit within the scope of the Letter of credit line | By agreement, min 70.00 EUR |
| Preparation and coordination of letter of credit template | By agreement, min 70.00 EUR |
| Amendment/cancellation of letter of credit | 70.00 EUR |
| Handling and payment of documents | 0,20%, min 85.00 EUR |
| Discrepancy fee | 70.00 EUR/ 80.00 USD |
| Letter of credit utilisation (depending on the type of collateral): | |
|
0,2% of the amount of the credit letter, min 70.00 EUR2 |
|
By agreement, min. 70.00 EUR |
| Deferred payment fee | 70.00 EUR |
Export letters of credit
| Service | Fee |
|---|---|
| Preparation and coordination of letter of credit template | By agreement, min 70.00 EUR |
| Advice of letter of credit | 85.00 EUR |
| Advising of amendment/cancellation/non-utilisation of a letter of credit | 70.00 EUR |
| Preliminary checking of letter of credit documents3 | 70.00 EUR |
| Handling and payment of documents | 0,20%, min 85.00 EUR |
| Confirmation of a letter of credit | According to risk, min. 100.00 EUR |
| Discounting of documents | According to risk, min. 100.00 EUR |
| Preparation/advise of assignment of proceeds | 70.00 EUR |
| Payment under assignment of proceeds | 20.00 EUR |
| Transfer of a letter of credit | 0,2%, min 150.00 EUR |
| Deferred payment fee | 70.00 EUR |
Additional services
| Service | Fee |
|---|---|
| Processing and forwarding information of financial transactions on behalf of the customer | 30.00 EUR |
| Preparation of agreement and collateral agreements in electronic format | Free of charge |
| Preparation of agreement and collateral agreements in paper format | 35.00 EUR |
| Authorisation to receive goods addressed to the bank | 70.00 EUR |
| Costs of courier services | Actual costs |
| Commissions charged by correspondent and cooperation banks | Actual costs |
| Verification of counterparties involved into deal (applicable for deals with high risk countries)* | 45.00 EUR |
*In accordance with the bank’s related internal and external regulations at the moment of verification
1 The commission fee must be paid on the day the agreement or amendments are signed.
2 Account balance fee shall be applied for the balance of funds in the accounts as indicated in SEB bank’s General Price list for Corporate Customers.
3 The fee is applied in case of more than one document undergo prior inspection.
Additional information
Other ways to finance your trade
Factoring
Change your invoices into cash flow. Offer extended payment terms to your clients, without reducing your working capital or sales volume.
Documentary collection
A payment form which a seller/buyer can use to strengthen their position in a trading transaction.
Bank guarantees
Guarantees provide your trading partners the commitment of SEB to pay to them in specified situations.
Options to finance your business’ purchases
Overdraft
Flexible option for using extra cash, offering the possibility to have a negative balance on company’s account for financing working capital.
Working capital loan
To cover temporary shortage of working capital or expenses.
Need advice on financing?
- Our specialists will help you find the suitable financing solution for your business.
- We have a dedicated team of professionals you can trust
