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L/C Issuance with Credit Limit

This refers to the credit line SRCB granted to qualifying customers for opening L/C with zero or discounted margin deposit within the line.

Features

Application procedures are simple.

Make full use of bank credit and obtain goods without cash payment.

Funding cost lower than that of working capital loan.

Target customers

Importers that have sound settlement history and credit record at SRCB.

Application process

1.     SRCB to review the application upon submission, and determine credit limit taking consideration of the importer’s repayment capability, performance record, collateral information, etc.

2.     SRCB to accept the importer’s application, register the credit limit and issue the L/C.

3.     Once SRCB receives the trade documents presented by the exporter, SRCB will make outward payment upon checking and examining the documents, meanwhile restore the credit limit.

Case study

Domestic importer A is going to import raw steel valuing USD 5 million from a Korean company B. Since the two companies are doing business for the first time, B has no understanding of A’s credit information, and requires prepayment or L/C for settlement. But A doesn’t have enough funds, so it is apply for credit line with SRCB.

SRCB made a sight visit to A, and regards A meeting SRCB requirements for credit line though it is a emerging trade company. So SRCB suggests A to apply for the L/C credit line at SRCB, and promises to grant A with trade financing credit limit for L/C issuance and discount the margin deposit. To ensure the quality of goods, SRCB also suggests A to add a “3rd party quality assurance” clause in the L/C. since bank credit is replacing commercial credit, Company B accepts the commercial order from A.

Company A applies for 60 days time L/C at SRCB, with Company B be the beneficiary. When the trade documents delivered, since it is time L/C, company A can pick up the goods upon honoring the payment at SRCB. At the maturity of L/C, SRCB will debit A’s account and make outward payment.

By using import trade financing product, Company A successfully made the deal.

Comments

By using SRCB’s L/C product, company A improves its capital utilization, imports the goods without making sight payment, and extends the payment period through time L/C. These are all the advantages L/C bring with. Besides, importers can improve its negotiation position, and effectively control the rights of goods, shipment date and quality of goods through L/C clauses.

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