About letter of credit
Letter of credit (L/C) gives securance for both transaction partners – exporter and importer. The seller has guaranteed payment in exchange for agreed documents, confirming that the goods have been shipped or services have been provided meanwhile the buyer receives a guarantee that the seller will not receive the payment, if goods or services are not provided in accordance the L/C.
This service is beneficial in case you have a new international business partner or if your cooperation partner requests this type of transaction. L/C is a separate transaction, independent of trade or other agreements – all banks involved in the L/C transaction are working only with documents, not goods or services that these documents refer to. L/C can differ also with the form of payment – you can choose the most appropriate payment for your transaction.
Are you the seller (exporter)?
- The L/C is opened by the buyer and sent to your (seller’s) bank, who will advise it to you. You have to check whether the terms are acceptable.
- You will receive the payment for goods on time. After submitting agreed documents to the bank, the buyer’s bank will pay you the amount specified in your L/C.
- You will be able to manage the company financial flow better. You can offer the buyer to use the deferred payment and the bank can offer you the discounting of the payment.
- L/C can be confirmed to cover issuing banks payment risk.
Are you the buyer (importer)?
- Possibility to avoid advance payments.
- You get the goods at the agreed time and the seller must also fulfill all other contractual conditions according to L/C in order to get the money. You get the goods at the agreed time and the seller must also fulfill all other contractual conditions according to L/C in order to get the money.
- If you use the L/C for a payment, you can apply for a loan from the bank.
- The seller can improve buyer’s working capital by L/C with deferred payment
Title
How does letter of credit work?
Description
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The buyer and the seller enter into a purchase and sales transaction agreeing to use the L/C for a payment.
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The buyer submits an application to their bank to issue the L/C under the conditions agreed with the seller.
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The buyer’s bank makes a decision regarding the issuing of the L/C, based on the latter’s reliability and forwards issued L/C to the seller’s bank.
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The seller’s bank advises the seller of the L/C issuance and the latter checks the compliance of its terms and conditions.
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The seller ships the goods to the buyer as agreed and presents the documents required in the L/C to their bank.
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If the documents are in compliance with the terms and conditions of the L/C, the seller’s bank will forward them to the buyer’s bank which will make a payment against the documents. Once the seller’s bank receives the money, it will transfer it to the sel
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The buyer pays their bank and in return receives the documents accompanying goods.
Simple steps for the buyer to apply
1.
Register for consultation
2.
We will contact and advise you
3.
Send the filled application to prekybosfinansavimas@seb.lt
4.
After a positive decision, sign the agreement if necessary
Additional information
Export letter of credit
| Charges | |
|---|---|
| Export L/Cs | |
| Advising of L/C | EUR 45 |
| Advising of amendment to L/C | EUR 30 |
| Confirmation of L/C (deferred-payment L/C confirmation period extended until maturity date) | As agreed, min EUR 100 |
| Transfer of L/C | 0.2 per cent of the transferred amount, min EUR 100 |
| Pre-checking of documents (per each set of documents) | EUR 50 |
| Handling / checking and / or payment against documents (per each set of documents) | 0.2 per cent of document value, min EUR 100 |
| Reimbursement claim | EUR 20 |
| Advising of L/C beneficiary’s assignment of proceeds | EUR 60 |
| Maturity control in case of a deferred payment | EUR 30 |
| Transfer of receivables to another beneficiary | EUR 25 |
| Import L/Cs | |
| Issue of L/C with cash collateral | EUR 1001 and 30 EUR, if paper application is submitted |
| Issue of L/C without cash collateral | By agreement and EUR 100 and 30 EUR, if paper application is submitted |
| Amendment to L/C | EUR 60 and 30 EUR, if paper application is submitted |
| Document checking and / or payment against documents (per each set of documents) | 0.2 per cent of document value, min EUR 100 |
| Cancellation of L/C | EUR 30 |
| Maturity control in case of a deferred payment | EUR 30 |
| Endorsement of a bill of lading | EUR 30 |
| Other services | |
| Conditional payment (if funds received from any other bank) | 0.15 per cent, min EUR 90 |
| Preparation of request or information related to L/C at the customer's request | By agreement, min. EUR 45 |
| Drafting of L/C or deal structure | As agreed, min EUR 45 |
| Dispatch of documents abroad by courier | EUR 55 |
| Dispatch of documents in Lithuania by courier | EUR 20 |
1 If the funds are deposited, a fee shall be applied for the balance of funds in the accounts as indicated in Price list of SEB bank's services and transactions for business customers
Other ways to finance your trade
Factoring
Change your invoices into cash flow. Offer extended payment terms to your clients, without reducing your working capital or sales volume.
Documentary collection
A payment form which a seller/buyer can use to strengthen their position in a trading transaction.
Bank guarantees
Guarantees provide your trading partners the commitment of SEB to pay to them in specified situations.
Options to finance your business’ purchases
Overdraft
Flexible option for using extra cash, offering the possibility to have a negative balance on company’s account for financing working capital.
Working capital loan
To cover temporary shortage of working capital or expenses.
Need advice on financing?
- Our specialists will help you find the suitable financing solution for your business.
- We have a dedicated team of professionals you can trust
