Simple ways for Small and Medium Enterprises to Acquire a Letter of Credit

08 January, 2024

If you are looking for Export financing, HDFC Bank is just the trade finance partner for your business. The bank can structure complex Letter of Credit with fast turnaround times and affordable charges. HDFC Bank is a direct member of SWIFT with banking arrangements with over 370 banks worldwide, giving your business the opportunity to transact anywhere across the globe.

A Letter of Credit, also known as a documentary credit, is issued by a trusted domestic bank. The Letter of Credit is a promise from the bank that the seller will receive timely payment as specified by the terms of the agreement. In case the SME fails to fulfil the obligation, the bank will pay the international seller on behalf of the buyer.

Leverage your banking relationship

A Letter of Credit will, in most cases, be issued by a bank that already has an existing banking relationship with you.

Documents required for a Letter of Credit

The requisite list of documents to avail of a Letter of Credit will vary depending on the terms of the agreement . It will also differ from one financial institution to another.

Here is a list of papers you may have to prepare:

• General Undertaking/Indemnity on Stamp Paper
  
  
• Deposit letter on the letterhead of the depositor/business
  
  
• Partnership deed (in case of partnership firm)/Recommended Board Resolution (for companies)
  
  
• Import Export Code (IEC)
  
  
• OGL cum FEMA declaration
  
  
• Purchase order/Performa invoice
  
  
• Shipment details: Airway bill/cargo receipts for road transport/documents for railway transport
  
  
• Insurance details on a C&F/FOB basis
  
  
• Annexure to the LC (in case of any additional conditions)

How to go about getting a Letter of Credit

The process and terms of getting a Letter of Credit will vary from bank to bank. However, getting a Letter of Credit from a trusted partner like HDFC Bank is quick and simple.

• To begin with, if you've never availed of any credit facility before, the bank will conduct a due diligence of your business. This is a one-time activity and will be used when you apply for any credit services in the future.
  
  
• Once the business is assessed and limits are in place, you can place a LC request through Home Branch/ through online channel.

Benefits with HDFC Bank

• Better Turn Around Time: Wide Correspondent Bank network to fasten LC transmission, Receipt & Advising
  
  
• Compliant & Secure: Payment security to both parties with compliance to UCP 600 international standards
  
  
• Certified Assistance: Certified Trade Specialists with expertise to interpret & articulate LC T&Cs
  
  
• Dedicated Service: 100 & branches equipped to handle LC with dedicated Trade Helpdesk

*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.

Click here to know more