What is a documentary credit?

also known as commercial accreditation, documentary loan is a type of international trade, which allows the use of a contract from the importer in honor of the purchase contract concluded with the exporter as the basis for the agreement, rather than consider rating and assessment of the importer. The exporter and its bank, sometimes referred to as an agreement on the loan, accepts a commercial accreditation issued by the importer bank as sufficient to accept and process the order. Documentary credit is often included in other key documents related to the purchase, including a conosament, a certificate of origin and any insurance documents related to purchased items and the transport process. Given that the accreditation letter is issued by the Bepolovina buyer can safely assume that the order will be paid according to the terms of the purchase contract and that these payments will be rendered in time. The bank that issues commercial accreditation basically promises that the debt, which significantly minimizes all the risks that the exporter accepts when enteringSales transaction with importer.

In fact, there are two different types of documentary credits. One is known as an import or export accreditation and serves the purpose of assistance in successful completion of the store that has already started. The second type, known as an emergency accreditation, is more open and can be used as a financial tool when starting a trade with more than one particular exporter. In both situations, the idea is to ensure that the seller is guaranteed to pay in timely Manner, without the need to launch credit and other types of checks on the buyer before consent to the transaction processing. When the documentary credit is presented early, the sale can proceed quickly, often with less delay. This may be particularly important if the goal of the importer or buyer is to sell the purchased goods quickly for profit and must do so in a fixed time frame to prevent the loss of potential sales.

dockMentary credit is a process that protects the interests of all parties concerned. Sellers are sure that a verifiable and renowned financial institution supports the purchase and that the funds will be transferred according to the terms of sale. At the same time, the buyer can use this approach to prevent the delay associated with credit inspections and work via the bank to ensure that the transaction is smooth, the goods are delivered in time and any occasion to profit from the sales salesman is not lost. For this reason, many -eyed, relying on imported goods to earn a living, use this approach to save time and increase chances of rapid revenues from their purchases.