Discounting of L/C by bank

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dereramesh
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Joined: 08/21/2008
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Dear All,

I had a querry.

We have received L/C and now we want to get the the L/C discounted from bank before shipment and producing the documents to advising bank.  Can advising bank discount the L/C and credit the funds to our bank account.

What should be mentioned in L/C and what all documents are required to get the L/C discounted

If L/C is transferable what will be your answer

Ramesh

Investment Banker
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Joined: 09/11/2008
Re: Liquidating LC

Ramesh,

 

I may be able to assist you with this if need be. Please contact me at [email protected] 

andibiola
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Joined: 08/18/2008
Discounting of L/C by Bank - Red Clause L/C

Dear Ramesh,

I think what you need is a red clause L/C.

Red clause L/C can provide you financing before you produce the shipping documents.

The requirement is usually simple a draft, a simple receipt and/or a beneficiary statement that you will ship the goods within the timeframe provided in the L/C (or the agreed contract). But bear in mind, not every bank can give you financing for this scheme. This is because banks will also think for the safety of their claim that they will get paid, and that they will usually send the draft and your receipt on collection basis for payment. Only if they have the payment, they will credit the funds to your account.

For this red clause scheme, this is just like your buyer is  financing your company for goods production before you can do shipment.

The terms usually put on the L/C are:

-the payment terms, usually 20% (or more) to be paid at sight (upon presentation the the already mentioned documents)

-80% (or less) to be paid upon presentation of your normal shipping documents 

 

The transferable thing does not have any correlation to this discounting matter.

 I hope this helps.

Catalyst
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Joined: 06/15/2007
Discounting of LC by bank

We have recently discussed this issue in response to another question. Briefly:

  1. Any bank can discount your bills.
  2. But negotiation or acceptance (as defined in the UCP) under the LC can be done only by a nominated bank.
  3. If the advising bank is also the nominated bank, it can negotiate and credit the amount to your bank account (in that case, the term discount or purchase need not be used; it will be a negotiation under the LC).
  4. Otherwise, the bank that discounts your bills should deliver the complying documents to the nominated bank within the validity of the LC.

Hope I am clear on this issue?

Catalyst
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Joined: 06/15/2007
Discounting Bills

Pl mail to [email protected]

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