Frequently Asked Questions

 

LETTER OF CREDIT/STANDBY LETTER OF CREDIT

 

What are Letters of Credit?

A Letter of Credit is a payment term generally used for international sales transactions. It is basically a mechanism, which allows importers/buyers to offer secure terms of payment to exporters/sellers in which a bank (or more than one bank) gets involved.

The technical term for Letter of credit is 'Documentary Credit'. At the very outset one must understand is that Letters of credit deal in documents, not goods. The idea in an international trade transaction is to shift the risk from the actual buyer to a bank. Thus a LC (as it is commonly referred to) is a payment undertaking given by a bank to the seller and is issued on behalf of the applicant i.e. the buyer. The Buyer is the Applicant and the Seller is the Beneficiary. The Bank that issues the LC is referred to as the Issuing Bank which is generally in the country of the Buyer. The Bank that Advises the LC to the Seller is called the Advising Bank which is generally in the country of the Seller. 

What is a Standby Letter of Credit?

A Standby Letter of Credit or Bank Guarantee (BG) is where one Bank (the Issuing Bank A) issues an indemnity(cover/insurance) to another Bank (the Beneficiary Bank B) or directly to a Beneficiary, on behalf of its account holder. The Issuing Bank will expect its account holder to pledge ‘assets’/cash to the bank for its issue.

There are effectively two main types of Bank Guarantees,

(1) A Direct Guarantee where the account holder instructs his bank to issue a Guarantee directly in favor of the Beneficiary, and

(2) An Indirect Guarantee where a second bank is requested to issue a Guarantee in return for a counter-Guarantee. In this case the Issuing Bank will indemnify losses made by this second bank in the event of claim against the Guarantee.

A Bank Guarantee is considered a “Demand Guarantee” and as such is governed by the International Chamber of Commerce (ICC) Uniform Rules for Demand Guarantees (URDG).

Can a company access Bank Instrument (SBLC/BG) as collateral?

Yes, Trade Finance Capital primary objective is to assist prospective client’s access collateral in form of SBLC/BG to process commercial loans or project finance. You don't have to risk your asset.  

Can a startup company access a financial instrument (Standby Letter of Credit/Letter of Credit)?

Yes a startup company is able to access lease collateral in the form of a letter of credit and standby letter of credit if they satisfy the funding guideline provided.

Can a company access a financial Instrument without any payment of fees?

Yes, a company can access a financial instrument without paying any upfront fees if the receiving bank is able to verify via bank swift ability of its client ability to pay for fees. This option is available for only for some of the issuing institutions we arrange financial instruments from.

Is Trade Finance Capital a legal entity and is it authorized by regulators to perform the services it provides?

Trade Finance Capital working hand inglove with International affiliates and correspondants work collaboratively to support clients in different jurisdictions i.e. Fund Managers are legal entities registered in various jurisdictions they operate in and authorized by relevant authorities to perform services offered on this BLOG.

US BANK BUSINESS ONLINE ACCOUNT 

What banks in the United States allow non-citizens to sign up online for an account?

Most banks in the US will set up a bank account for non-citizen/non-resident but physical address and presence will be required. At TFC, we professionally connect clients to a seamless opening of US bank business account online without physical address and presence. 

From outside United States, how can a non-US citizen/non-resident set up a bank account online?

Certainly, at TFC to open an online business account is as simple as sending some details to proceed such as name, address, date of birth and other little information to help us identify each customer.

Does the account come with a debit card?

No, but it will introduce debit and credit card this year (2019)

Will the account be linked to my online business and payment gateways in the US?

The account will be associated with Ebay, Amazon, Paypal etc for easy transactions.

How can I open a US bank account without going to the United States?

Account will be opened remotely, in most cases the bank will accept scanned copies of documents. there is no need to courier originals to the bank.