Rules and Regulations are important for every Business it is a small business or a large enterprise without rules and regulation it is difficult to run your business smoothly and in efficient manner .But making a rules for a business is another important task that need to be focused carefully and with expertise knowledge especially for business transactions. Here we describe one of the processes with whom you can maintain your financial records and transactions with a third party as a guarantee.
Security involved in Letter of Credit
A letter of credit is a financial appliance used to secure Business Transaction to a particular party on production of specific documents that proof the shipment of goods. Letters of Credit are typically required by in a foreign country suppliers in a challenge to mitigate some of the risks connected with trading on open account terms.
The riskier the transaction, the harder and extra costly it will be to finance. So we need to develop a specified rule for that and Letter of Credit is the best of best method to secure our Business Transactions. The political and economic immovability of the buyer’s country can also be a question. To endow with financing for either financial statement receivable or the production or purchase of the manufactured goods for sale, the lender may require the most secure processes of payment, a Letter of Credit (possibly confirmed), or export credit insurance or guarantee.
Rules related to Letter of Credit:-
- The very first rule is that both the parties i.e. importer and exporters have an account on a commercial Bank.
- Both need to check the complete Bank transaction statement of opposite parties i.e. exporter need to check the bank transaction of importer party and importer needs to check the Bank transaction of exporter parties.
- Check the capacity of both the parties i.e. both have the capability to fulfill the necessary requirements.
- Check both have a full documents needs to develop a Letter of Credit.
- Put Bank Transaction as a proof of your financial and billing records.
Normally this work is done by Commercial Banks or other banks but you also need to focus on all this things for your business and financial safety. Bank will do all this work in a specified process and put your transaction as Bank Guarantee. To Know More about rules related to Letter of Credit please visit our BLOGs and contact us at NumeroUno Business Consultancy.
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