Export/Import Financing

Banks offer financing intermediary service: Letters of Credit:

An LC, also referred to as a documentary credit, is a contractual agreement whereby a bank in the buyers country, known as the issuing bank, acting on behalf of its customer (the buyer or importer), authorizes a bank in the sellers country, known as the advising bank, to make payment to the beneficiary (the seller or exporter) against the receipt of stipulated documents. The LC is a separate contract from the sales contract on which it is based and, therefore, the bank is not concerned whether each party fulfills the terms of the sales contract. The banks obligation to pay is solely conditional upon the sellers compliance with the terms and conditions of the LC. In LC transactions, banks deal in documents only, not goods. McGraw Hill Companies, Inc., 2000

Draft or Bill of Exchange: A Bill of Exchange is a special type of written document under which an exporter ask importer a certain amount of money in future and the importer also agrees to pay the importer that amount of money on or before the future date. This document has special importance in wholesale trade where large amount of money involved.

Following persons are involved in a bill of exchange:

Drawer: The person who writes or prepares the bill.
Drawee: The person who pays the bill. Payee: The person to whom the payment is to be made.

Holder of the Bill: The person who is in possession of the bill.

Carriers provide to the exporter

Bill of lading: Bill of Lading is a document given by

the shipping agency for the goods shipped for transportation form one destination to another and is signed by the representatives of the carrying vessel.