Key Differences Between A Letter Of Credit & Standby LC

Letter of credit (LC) & Standby Letter of credit (SBLC) are both the most popular, & reliable trade finance instruments used by global importers & exporters in international trade to reduce the risk of payment failure & to ensure financial stability. 

A Letter of credit is a primary method of payment, while Standby LC is used when there’s a risk of buyer’s non-performance during a transaction. So, what is the difference between an LC and SBLC?Let’s check out:

Letter of Credit Vs Standby Letter of Credit

Both the letter of credit (LC), and the Standby letter of credit (SBLC) are payment guarantee instruments used in international trade. In this article, we’ve discussed the key differences and usage between LC and SBLC. Take a look:

What is a Letter of Credit?

Under a letter of credit service, the issuing bank guarantees an on-time & full-fledged payment to an exporter on behalf of its client ie. importer for the ordered goods or services. But in the event, if the importer defaults in payment or is unable to fulfill the terms & conditions of the LC contract, then, the issuing bank will compensate the beneficiary ie. the exporter. 

The role of the issuing bank is to make sure that the buyer pays on time and the agreement goes as planned catering to all the T&Cs being followed by both parties.

Originally published at https://www.axioscreditbank.com

Top 8 Questions About Currency Trading

International Foreign exchange is unfamiliar terrain for all retail traders, though the foreign exchange market is the biggest expanded financial market in the world. Until the time internet trading became popular, Forex was earlier the only path of large and big financial institutions, companies hedging funds, and multinational companies. Now, the time has changed. Nowadays, individual and private investors are hungry for taking all the data and information about forex. Whether you need a fresher course based on currency trading or you are a forex novice, here, we have answers for some of the most asked questions that are concerning the foreign exchange market.    

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      Originally posted:- https://www.axioscreditbank.com/blogs/top-8-questions-about-currency-trading

15 Key Questions Venture Capitalists Will Ask Before Investing in Your Startup

Getting your business pitch ready is not an easy job. With cheesy people skills and communication, you must know how to captivate the International banking services and angel capitalists for easy finance services. The explosion of business riches and rewarding apples is earned through intelligent tactics and manipulations in business. You must know your weaknesses than your strengths before earning business services. The capitalists will drown you under the sea of tacky and perplexing questions. With your weaker and fragile answers, you may create a roadblock in your business path and weaken your startup finance service. A well-rehearsed answer for the pitch has to be sculpted for a good experience to paralyze the economic challenge so that you impress Investment banking services. Obviously, the angel capitalists will churn you out through the customary- you -know-whats session to expose your stark reality before providing your business services. Your reasonable answers must get filtered through their interrogation sales funnel. Creation of halo and beta impression, simple, thoughtful, and smart answers have to be constructed for their counterpart so that your business highway is cleared of muds and ditches of economic challenges and you get easy business investment. No doubt, the venture capitalists will put gotcha questions and break your key secrets of business strategy and goal.

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         Originally posted:- https://www.axioscreditbank.com/blogs/15-key-questions-venture-capitalists-will-ask-before-investing-in-your-startup

What do you mean by import finance and how is it beneficial for a business?

 In simple terms, Import Finance implies funding the gap of goods collection and making the payment. In addition, Axios Credit Bank Ltd. can say that it is a kind of short-term financing and generally the third party issues it. The funds that businesses or individuals use to bring the goods and services into their country are Import Finance. There could be some issues while managing the cash flow statements of the company. It is because the frequently involved disruptions and complications imply that the payment has been made a long before the delivery of the goods.

Apart from this issue, there are clearly various advantages of importing such as – quality of goods is high, lower prices will get a competitive advantage as well. By doing an overseas business, there are many challenges as well that any businesses have to face. They have to follow the extended payment terms, have to risk the business more than available funds, and have to purchase goods in large volumes. It will totally depend upon the risk taken that it would work as a miracle or a disaster.

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      Originally posted:- https://www.axioscreditbank.com/blogs/what-do-you-mean-by-import-finance-and-how-is-it-beneficial-for-a-business

All You Need To Know About Trade Finance

Global trade and export financing markets are getting reviewed by trade finance since 1983. There can be various definitions to understand the suitable meaning of trade finance.

Axios Credit Bank Ltd. has described this term as both “Science” as well as “an impressive term.” It is a science because it manages the requirement of capital in a business for global trade. However, there are many tools within the science at the disposal of financiers, which determine the way cash flows, how the companies can utilize credit, investments, and others for international trade.

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    Originally posted:- https://www.axioscreditbank.com/blogs/all-you-need-to-know-about-trade-finance

How Different Types of Trade Finance Work as a Part of the International Trade?

There are several kinds of finance available in the market that can facilitate the trading of goods both nationally and internationally. We also helps and accommodates Trade Finance Services that facilitate international payments for selling and buying goods globally. Axios Credit Bank Ltd also mitigates currency risk and exposure for both debt and equity fundraising.

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         Originally posted:- https://www.axioscreditbank.com/blogs/how-different-types-of-trade-finance-work-as-a-part-of-the-international-trade

Guide to Letter Of Credit: Definition, Types, and Procedure

 

Being a global businessman, you have probably heard or aware of the term Letter of Credit. Today, the letter of credit has become a crucial and important part of international trade that soothes the smooth international transactions made by any businessman. What is it exactly? Find out.

Guide to Letter Of Credit

Well, a letter of credit is a document issued by one bank to another with a guarantee to pay a specified sum of money to the seller on behalf of the buyer. In simple words, if the particular buyer is not in a condition to pay the seller on time, the payment will be made by the bank. It is an important document in the case of international dealings and is one of the major financial services that are required by global businessmen. One of the most important & crucial functions of a letter of credit is that buyers and sellers both can reduce their risk and ensure on-time payment with the delivery of goods and services.

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Originally posted:- https://www.axioscreditbank.com/blogs/guide-to-letter-of-credit-definition-types-and-procedure

Bank Guarantee Vs Letter Of Credit - Find The Salient Differences

What is the difference between the Bank Guarantee and Letter of Credit? This is the most common question that people involved or dealing with national or international trade have been struggling with for a very long time. And this is not surprising at all. Both of these terminologies look similar and provide similar benefits to buyers and sellers. A bank guarantee and letter of credit both are promises from a bank or financial institution that the sellers would be paid on-time with the full amount in exchange for their services regardless of the financial capabilities of the buyer. In both of these concepts, the bank guarantees and assures the third-party that if the buyers are not capable of repaying, the bank will pay it on behalf of them.

Whenever any businessman wants to deal with import-export business or expand his business in the different corners of the world, he needs assurance from the buyer to get paid on-time after delivery of goods or services. This is done by banks both in case of national and international business but the main difference is that bank guarantees are often used in real estate and infrastructure to reduce the credit risks in domestic markets whereas Letter of Credits is used in other commodity international markets.

To understand the difference between these two, we must understand their definition first. Here we go:

What Is a Bank Guarantee/ Standby Letter Of Credit?

As the name suggests, in these services, a bank gives the guarantee to the beneficiary (Third-party) on behalf of its customer to pay the full-amount on-time in the event of default by its customer ie. buyer. It is a commercial instrument that takes place in public tenders or government-related works in the domestic market. So the bank guarantee has the same functions but in different ways. It is used in mitigating the risks in real estate and infrastructure projects.

Types of Bank Guarantee

• Financial Guarantee
• Performance Guarantee

What is a Letter of Credit?

A letter of credit is a financial instrument issued by the buyer’s bank to the seller to assure on-time payment after the terms and conditions mentioned in LOC are met by sellers. Every letter of credit has certain terms and conditions which are required to be fulfilled by both buyers and sellers for executing the transaction successfully. Here the sellers get guaranteed payment of their sale of goods from the buyer’s bank in case of international trade.

Types of Letter of Credit

• Commercial
• Revocable
• Irrevocable
• Confirmed
• Unconfirmed
• Back-to-Back
• Red Clause
• Transferable
• Un-transferable
  

Key Points Of Differences Between Bank Guarantee And Letter Of Credit:

Basis	Letter Of Credit	Bank Guarantee
Boundary	It takes place in international markets.	It takes place in domestic markets.
Protection	It also protects both the parties but favors sellers.	It protects both the parties but favors buyers.
Parties Involved	5 or more	3
Industry Type	It is used by merchants in international  markets	It is used by parties involved in real estate and infrastructure developers.
Bank Liability	Primary	Secondary
Preference	It gives preference to the fulfillment of the terms and conditions of LOC	It becomes effective only when there is a default made by the buyer in making payments
Payment Time	Bank only pays when the Terms and conditions are met by both the parties	Bank makes payment when the contractual obligations are not fulfilled
Frequently Used In	Import and Export Business	Government-related work

Other Points Of Differences:

• A letter of credit issued by the buyer’s bank to the seller’s bank is an acceptance of the invoices presented by the seller and a guarantee to make payment after the fulfillment of terms and conditions of the agreement. Whereas in the bank guarantee services, the guarantee given by the bank to the beneficiary on the behalf of the applicant will only be effective if there is a default made.
• In a letter of credit, the bank bears the risk of the primary liability where it collects payment from the client afterward anyhow but on the other hand, the banks stand secondary as it will pay only when the buyer is not capable to do so.
• In the case of international trade, the involved merchants in the import and export of goods will consider letters of credit to ensure delivery and payment due to foreign countries and distance issues. In contrast, the contractors who are bidding for real estate or infrastructure projects will ensure their financial credibility through a bank guarantee.

Final Words

A letter of credit is used when there is a high level of risk involved in business globally but with the time, it is also being used in domestic trade. In simple words, it does not matter whether it is a domestic or international market, the buyer always wants to make sure on-time delivery of goods while an assured payment is a seller’s right. Both instruments are there to reduce your risks.

What is Shareholders Agreement : A Complete Guide for Small Businesses

Before understanding what a shareholder's agreement is, we should understand what a shareholder is. A shareholder can be a person, company or organization that holds stocks in any given company. Sometimes they are called stockholders of any corporation that holds one or more shares of stock in the corporation. These shareholders receive declared dividends if the company is earning profits and performing well. They also have a right to vote in the company on certain matters and can also be elected on the board of directors.

What Should Be Included In A Shareholders Agreement?

Introduction to Trade Finance (Import & Export)- Definition, Types, and Benefits

If you are a businessman who is running an international business in different corners of the world, you might be aware of the situation when you need financial help for importing or exporting goods in other countries faster and easier. This is a situation where the concept of Trade Finance comes into the picture. 

What is Trade Finance?

Trade finance is the collection of essential financial instruments and products that are used by financial companies to facilitate finance to global businessmen so that they could perform their international transactions with smooth, ease and comfort. In simple words, trade finance makes it easier and possible for importers & exporters to transact their business through trade. It eliminates or reduces the risks involved in an international business transaction. Trade finance is an umbrella term that means it covers those financial instruments that are being used by many banks and companies to make trade finance transactions feasible.

Trade Finance

There are two concerning parties in Trade Finance:

1. Exporter - who needs payment for their goods and services
2. Importer - Who wants to make sure that their payment is for the correct quality & quantity of goods.

Does the Letter of Credit safe and Secure mode for International payment or Not?

An International Letter of Credit is a payment method which particularly suites the transactions of high value and high risk. This method is quite complicated, and one of the traditional ways of making international payments. The companies decide to trade through Letter of Credit Services because of two reasons. One reason is due to the rules and regulation of foreign government, and the second reason is due to the lack of trust between the parties those are going to trade with one another. This lack of trust mainly occurs depending upon the value of the transaction with which the financial risk is associated.