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USE LETTERS OF CREDIT (L/Cs) TO GET FINANCING

Written by: Tyler Hicks

Article Overview: How to use letters of credit in international trade deals

USE LETTERS OF CREDIT (L/Cs) TO GET FINANCING

USE LETTERS OF CREDIT (L/Cs) TO GET FINANCING

LETTERS OF CREDIT (“L/Cs” FOR SHORT) are valuable for financing trade activities in import-export, for guaranteeing loans, and for a variety of other financial transactions. To get an L/C or have one confirmed (evaluated as good) take these easy steps now:

1. Associate yourself with an international bank having a strong network of overseas correspondent
banks and associates

2. Work with branches of overseas banks having offices in your country because they can speed
all types of international transactions

3. Insist that the bank have the ability to confirm unconfirmed L/Cs you might get from overseas.
(When a bank confirms an (L/C) it--in effect--tells you that the L/C is good and can be trusted.)

WHEN A BANK ISSUES AN L/C IN YOUR FAVOR--that is an L/C you use to:

*Collateralize a loan you get for business or income real estate use

*Pay for imported goods which you sell in your own country

You will be charged a nominal fee--typically 0.25%. This amounts to $2.50 per $1000 L/C. Thus, on a $100,000 L/C you'll pay $2500 when the L/C has been in force for one year. This will be about $200 a month.

But during that time you can use the L/C to do any of the transactions mentioned above. So the L/C is really cheap advance confirmation that you can get a loan or import salable items.

BESIDES USING AN L/C AS COLLATERAL you can also get many other useful services from your issuing bank. Thus, the bank:

*Can issue valuable trade leads, telling you who's seeking what products or services in
overseas countries around the world

*Can handle paperwork for loans, imports, exports, and other international transactions
for you or your client

*Can be a valuable international partner anywhere in the world for you or your client

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Article Tags: collateral, confirmation, correspondent banks, countries around the world, financial transactions, import export, imports exports, income real estate, international partner, international transactions, issuing bank, letters of credit, loans, overseas banks, overseas countries, paperwork, useful services



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Re: Interrealtionship between financial statements - Hi there, It is not necessary to post each transaction in all of the separate financial statements. In any given transaction, you will post an equal amount of debits and credits to the associated accounts. An example would be if you were to write a check for $500 to office depot for office supplies. The posted transaction would be: DEBIT Office Supplies $500.00 CREDIT Bank Account $500.00 Once the transaction is posted, it will automatically show up on the appropriate financial statement report. In the above example, you would find the Bank Account transaction on the balance sheet and the office supplies transaction on the profit and loss statement. I hope this is clear! Please let me know if you have any other bookkeeping questions. I would be happy to help, Stephanie Horne
Re: SEEKING PRIVATE OR ANGEL INVESTOR - Definitely have a thorough and accurate business plan. In the US, you can get help at SCORE - their website is full of great information and you can check for local chapters. If you would like a book that has all kinds of great information about financing options - this one is very good --- HOW TO GET THE FINANCING FOR YOUR NEW SMALL BUSINESS: INNOVATIVE SOLUTIONS FROM THE EXPERTS WHO DO IT EVERY DAY—WITH CD-ROM This new book will provide you with a road map to securing the financing. The book goes into traditional financing methods and assists the reader in setting up proper financial statements and a proper business plan. It details the differences between debt and equity financing and how and why to use each. Valuation techniques are explained for determining what your business is truly worth. However, the book’s real strength is in explaining alternative and creative methods of financing, such as SBA financing, investor angels, IPOs, limited public offerings and venture capital. Essential resources for finding the detailed information you need are included throughout. Item # 9780910627559 $39.95 Shri


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