Presented by : Ahmed Mostafa el Hosiny

CORPORATE BANKING

LETTER OF CREDIT

The LC is a payment undertaking issued by a bank ( issuing bank ) upon the request of client ( buyer / importer ) according to certain terms and conditions , and it’s issued in favor of beneficiary ( exporter/ seller ) ,undertaking paying of money with in a period of time upon representation of a certain documents .

LETTER OF CREDIT

A mechanism, which allows importers/buyers to offer secure terms of payment to exporters/sellers in which a bank (or more than one bank) gets involved.

is a payment undertaking issued by a bank ( issuing bank ) to the seller and is issued on behalf of the applicant. ‘the buyer’.

The Buyer is the Applicant and the Seller is the Beneficiary.

The Bank that issues the LC is referred to as the Issuing Bank which is generally in the country of the Buyer.

The Bank that Advises the LC to the Seller is called the Advising Bank which is generally in the country of the Seller.

LETTER OF CREDIT

Benefits of L/Cs :

Note that the Bank scrutinizes the 'documents' and not the 'goods' for making payment. Thus the process works both in favor of both the buyer and the seller.

Provide assurance of payment upon representation of documents within the specified time frame .

Buyer is assured that the bank will thoroughly examine these presented documents and ensure that they meet the terms and conditions stipulated in the LC.

LETTER OF CREDIT

Typically the documents requested in a Letter of Credit are the following :

:

Commercial invoice

Bill of lading or Airway bill,

Insurance document;

Inspection Certificate

Certificate of OriginBut there could be others too.

LETTER OF GUARANTEE

A type of contract issued by a bank on behalf of a customer who has entered a contract to purchase goods from a supplier and promises to meet any financial obligations to the supplier in the event of default.

LETTER OF GUARANTEE

LETTER OF GUARANTEE

L/Gs are guarantee of payment only in case of transaction failure

LETTER OF GUARANTEE

Benefits of L/Gs :

in case you need a financial institution to commit, on your behalf

In case you do not have enough financial resources or collaterals available

If you participate frequently in public bids in order to obtain various contracts

In case of an Advance Payment Guarantee, advance he paid will be returned to him, upon his request, if the seller does not comply with the delivery obligations for which he received the advance .

LETTER OF GUARANTEE

The obligations of the issuing bank cease in the following situations:

Upon expiry of the Letter of Guarantee

Upon receipt of the beneficiary’s request for the Letter of Guarantee cancellation

After honoring the payment demand received from the beneficiary.

Thank You