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Methods of Payment in International Trade: Letters of Credit

David Noah | August 19, 2019 | Export Finance

One of the most important international trade considerations is how you are going to get paid for your exports. While relying on cash up front may eliminate the risk of non-payment, it limits your universe of potential customers since it can cause cash flow and other problems for the buyers.

There are five primary methods of payment in international trade that range from most to least secure. Of course, the most secure method for the exporter is the least secure method for the importer and vice versa. They key is striking the right balance for both sides. This article focuses on letters of credit.

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The Importance of Meeting Deadlines in a Letter of Credit

Catherine J. Petersen | August 12, 2019 | Export Finance

Dear Cathy,

Our firm has just begun to use letters of credit for our transactions, and I am the only one who is responsible for preparing all of the documents. What a headache!

Here's a situation that I faced just last week: The buyer's forwarder is booking the cargo with the ocean carrier. He told me that the earliest we can get our product on the ship is in two weeks, but that is after the unconfirmed letter of credit expires for shipping. Our customer is in India. They told us in an email to just go ahead and ship the goods and they will advise their bank to waive the discrepancies.

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Methods of Payment in International Trade: Cash in Advance

David Noah | July 22, 2019 | Export Finance

There is no point in exporting if you don't get paid for your products. Therefore it's important to select the appropriate payment method to minimize the payment risk while also accommodating the needs of the buyer.

As I pointed out in a previous article, there are five primary methods of payment for international transactions. This article focuses on the cash-in-advance option.

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Methods of Payment in International Trade: An Introduction

David Noah | June 17, 2019 | Export Finance

To succeed in international trade and win sales against foreign competitors, exporters must offer their customers attractive sales terms supported by the appropriate payment methods.

Since getting paid in full and on time is the ultimate goal for each export sale, you need to choose the appropriate payment method that minimizes payment risk while also accommodating the needs of the buyer.

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Letter of Credit Basics: Don't Grant Access to Your Goods Before You Get Paid

Chris Lidberg | May 20, 2019 | Export Finance

Unfortunately, once both parties agree to the method of payment, sellers frequently don’t give much thought to the actual terms and conditions that are contained in the letter of credit. This is a mistake, and it can lead to a world of problems.

As the seller, you should pay particular attention to the international bill of lading requirements in the letter of credit.

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My Checklist for Reviewing a Letter of Credit

Chris Lidberg | April 29, 2019 | Export Finance

I know there are companies out there that never look at their letters of credit (LC) until they are ready to present documents to the bank. Once they’ve received one from their customer, they assume it’s as good as gold and immediately put it away for safekeeping.

This practice sends shivers down my spine!

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Switching from Export Letters of Credit to Collections

Chris Lidberg | December 17, 2018 | Export Finance

In a previous article, Deciding on Approriate Export Payment Terms, I suggested that companies should perform an annual review of payment terms for each of their customers. A company’s creditworthiness and/or their country’s risk factors may improve or decline over time, and you may need to adjust their payment terms accordingly.

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8 Tips for Getting Paid with a Letter of Credit

Roy Becker | November 5, 2018 | Export Finance

For those of you who have worked with letters of credit in your export business, you know how complicated these transactions can sometimes become. However, if done the right way, getting paid this way has numerous advantages.

You could easily get frustrated if your letter of credit is delayed or not paid for any number of reasons. To help you avoid future frustrations and ensure a smoother process, follow these eight tips for using a letter of credit:

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Export Finance: Why Does It Take So Long to Get Paid?

Chris Lidberg | October 15, 2018 | Export Finance

You have shipped your product, payment is due, and the buyer claims they have made payment. As far as you can see, however, nothing has happened.

Does this sound familiar? I hope not, but if it does, let’s take a look at what might be causing the delay.

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Know the Risks of Using a Documentary Collection When Exporting

Roy Becker | October 1, 2018 | Export Finance

A documentary collection works well for many export transactions and provides a measure of security for both importers and exporters.

It provides security to buyers since they do not have to pay until they have documents, which provide proof of shipment. It also provides security to sellers since the buyer cannot receive the goods until he pays for them. Therefore, title to the goods remains with the seller until the buyer pays.

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