Letters of credit or documentary credit
As an exporter, you need to consider the credit risk associated with your foreign buyer. Business practices and conditions on foreign markets are beyond your control, and it’s not always convenient, or possible, to request advance payment for your merchandise or services.
Export letter of credit
Putting in place an export letter of credit is an excellent way of ensuring that your company will be paid for the merchandise and services it exports. Our international trade experts can provide you with the advice and know-how you need to use this widely accepted method of payment that is commonly used in international trade.
An export letter of credit is a document issued by a bank in the name of the importer or buyer. It’s an undertaking to pay the seller or exporter upon receipt of the documents required under the letter of credit within its validity.
- Payment is guaranteed: Instead of relying on payment by the buyer, the amount due is covered by the bank that issued the letter of credit
- Your cash flow is improved: option of immediate payment by Laurentian Bank (minus a small bank discount), regardless of the terms of payment granted to the buyer
- Additional payment security when the letter is confirmed by the Laurentian Bank
Import letter of credit
Conversely, if you’re an importer, an absolute must when establishing the terms of payment is to ensure that the merchandise which is shipped, as evidenced by the shipping documents is indeed what you ordered. An import letter of credit permits the importer to stipulate the exact documents that are required as proof that a shipment of merchandise meets their requirements. In this case, the bank will not agree to make the payment until these documents are presented or the importer accepts the discrepancies in the documents, if any.
Eliminate complications related to payments from abroad: Acting on your instructions, our International Collection department will process your commercial documents, such as shipping documents and invoices, or your payment documents, such as cheques, bills of exchange, promissory notes and other items. Not only can we obtain acceptance or payment through our correspondents but we can also provide you with direct collection services (depending on your volumes). As an importer you view the documents evidencing shipment and decide whether they reflect the merchandise you expected before you give instructions to proceed as the shipper has ordered.
Laurentian Bank of Canada has a network of correspondents banks based around the world which can act on our behalf and provide us the local market expertise to assist our customers in their sales or purchase initiatives into those markets. Canadian companies attempting to do business overseas can rely on LBC to give them assistance through this network.