A Letter of Credit is a document specially recognized to
watch on the cash flow in a business. Letters of Credit are incredibly useful
and sometimes necessary tools in the course of international trade. There is
typically a fee for opening a line of credit. The candidate pays the LC charge
to the bank, and may in turn charge this on to the receiver. From the bank's
point of view, the LC they have concern can be called upon at any time (subject
to the relevant terms and conditions), and the bank then looks to rescue this
from the applicant.
Writing Letters to Credit agency can
be very tricky. You may not know what to say, where to send cash , or what to
include. But, with a little knowledge you can get powerful results. They
essentially serve to notify a seller of goods that a buyer has a line of credit
with a credible financial institution. This allows the seller to feel more
assured that in the event the buyer is unable to cover the costs of the goods,
the seller will still get paid by the bank.
Enforceable Letter of Credit authorizes a company to
"draw" on the bank up to an aggregate amount upon demand according to
certain terms and condition. The Letter of Credit must specify the total amount
that may be drawn by the company from time to time, usually upon written
demand. The bank promises to honor the demand, again up to a certain amount.
The Letter of Credit should also
include the term of the line of credit, whether it is indefinite or whether it
will only continue up to a certain expiration date. A provision discussing the
automatic extension of the agreement may also be included. Usually the bank
will have the option to notify the company in writing that they are electing
not to extend or renew the line of credit. In this case, the company will be
responsible for paying the amount outstanding on or before the expiration date
of the agreement.
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