Letter of Credit

What is Letter of Credit?

Letter of Credit is a document issued by a financial institution ensuring the payment to the recipient regardless of the debtor’s financial circumstances. The document binds the financial institution to fulfil the responsibilities of the debtor in a situation where the debtor fails to pay the recipient. This is mostly used between exporters and importers to provide an assurance for payments for the products or goods provided. The document will be issued by the bank of the importer/buyer to the bank of the exporter/ seller guarantying to pay the agreed amount of money to the other party as specified in the letter of credit.
In such cases, the seller would like Equiflux Capital Group to provide assurance of payment. As an instrument of international trade, It is one of the most secure methods for a seller to be paid. Besides credit risk considerations, Letters of Credit are the customary business practice for long distance trade and a particularly important commission earning service for any financial institution.

Our Letter of Credit has particularly been attractive to individual and commercial clients since it serves as a credit certificate for our clients thus allowing Equiflux Capital Group to step in and make our clients transactions smooth and seamless. Our Letter of Credit ensures on-time payment to sellers, therefore Equiflux Capital Group has a reputation to make on-time payments upon the completion of the sellers obligation in the transaction. Our letter of credit also provides a safe platform for our clients to expand international business and transactions as these credits are strictly tailored to the parties’ needs. Through our Letter of Credit, risk of businesses shift from our clients to the issuing authority which is Equiflux Capital Group. This risk is secured by a legal guarantor thus making payment secure always.

OUR LETTER OF CREDIT

Equiflux Capital Group issues several forms of Letters of Credit depending on the form of transaction undertaken by my clients. Our Letters of Credit range from irrevocable letter of Credit, Standby Letter of Credit, Documentary Letter of Credit amongst others.

The irrevocable Letter of Credit is one of the most commonly sought document for international trade transactions, especially when the buyer and the seller are unfamiliar with one another, are separated by distance, and follow their respective country’s laws and trading customs. We issue the Irrevocable Letter of Credit to give the seller a guarantee that they will receive the fixed amount due, and also by the right time from the buyer. This document is irrevocable i.e. it cannot be revoked unless all the parties ask for a modification; only then can an exception be made. An Irrevocable Letter of Credit provides added risk protection for the seller by promising a guarantee from both the buyer's and the seller's financial institution.

SBLC or a Standby Letter of Credit is a payment guarantee issued by a bank or financial institution that can be used for a wide range of commercial and financial transactions, local or international. This can be very helpful in protecting the seller or exporter and the buyer or the importer in getting paid and receiving ordered goods as in agreed conditions. SBLC is a direct guarantee of Equiflux Capital Group to pay the recipient on a client’s behalf if he or she defaults. Some of the most common situations an SBLC is used in are repayment of trade loans, delivery of goods on an open account basis, or securing payment for goods/ services delivered by third parties.

Our Documentary Letter of Credit ensures that the importer/buyer receive their goods and services under the terms and conditions as initially set out and payment to the supplier as pre-agreed. It is ideal for meeting short-term needs and for new business relationships. We act as an intermediator ensuring both parties terms specified in the Documentary Letter of Credit are completely fulfilled to receive the payment. In an event of when the buyer is unable to pay after the terms specified in the Documentary Letter of Credit are fulfilled, seller/exporter can make a compliant document presentation demanding payment, to which the bank or financial institution is obligated to pay.

Our incorporation of Blockchain technology has helped us to transform the letter of credit process by making it completely paperless, digitized, and transparent. This transparency has helped to eliminate fraud and forgery, since the blockchain network is secured by permissioned participants, including reputable financial institutions. This has created for a highly secure network for document filing and retrieval, where each transaction is recorded in an immutable, auditable ledger not owned by any central entity.

This has helped us Reduce cycle time and costs. From application to issuance, a standardized, blockchain-based network can compress this time from days or weeks, down to a single day. Having a “single source of truth” lowers the risk of disputes, reduces processing time, and improves reporting and tracking. It also enhances security and prevent fraud as only authorized network participants can execute a letter of credit, which is encrypted, and an immutable record is stored on the blockchain. The record is auditable by all permissioned parties.

Finally it has helped to Increase productivity and visibility. This is as a result of our fully digitized workflows, with all key functions available online through a simple user interface, make it easy for applicants, beneficiaries and issuers to view, manage and report on their letters of guarantee.