LETTERS OF CREDIT – IMPORTED EQUIPMENT
A Documentary Letter of Credit acts as a guarantee of payment for imported goods upon meeting the terms and conditions attached to the release of funds to the exporter. Letters of Credit can be used to secure payments for imported business equipment and machinery. The terms of release of funds can include delivery to site, sighting and inspecting the imported goods as well as clearances and declaration of fitness. Letters of Credit can be produced against approved business loans for import purposes.
LETTER OF CREDIT PROCESS
- You identify the equipment or machinery to be purchased.
- You negotiate the price of purchase, the cost of import and shipment charges.
- We prepare and make the application for finance – You may consider Chattel Mortgage or Lease Finance as options of finance. Both Chattel Mortgage and Lease Finance can accommodate imported equipment purchase or lease.
- You enter into the purchase agreement with the supplier and a Letter of Credit is issued.
- On arrival of the imported equipment, they are inspected and cleared. Once clearance is issued, the letter of credit terms are considered to have been met and the funds are released to the supplier.
- The financier applies security requirements to secure the finance, ie, Register their interest in the goods against the loan.
- Repayments commence.
BENEFITS OF DOCUMENTARY LETTERS OF CREDIT
Letters of Credit reduces financial loss significantly as they act as safety net against payment for equipment prior to delivery and inspection. The lender may, in securing their interest impose further conditions as to the fitness, delivery and values of goods prior to the funds being released to the supplier. This means that your interest, the borrower or lessee, is further protected. In addition, Letters f Credit act as a guarantee given to the supplier which means they are more confident in accepting your orders for business equipment and machinery.
LETTERS OF CREDIT AND BUSINESS FINANCE
Letters of Credit can be issued on approved loans and other forms of finance in the interest of the client. Essentially, you are able to obtain Chattel Mortgage Finance or Lease Finance on imported business equipment, vehicles and machinery. The rules relevant to the finance you have been approved for will apply as if the goods were purchased locally. Ownership, lease agreements, Chattel Mortgage Agreements and Security requirements will apply to the imported good immediately on the commencement of the finance agreement.
COMMON USES OF DOCUMENTARY LETTERS OF CREDIT
Documentary Letters of Credit are commonly used for importing:
- Manufacturing Machinery.
- Construction, Excavation and Earth Moving Equipment.
- Farming Machinery and Equipment.
- Custom and Generic Printing Machines and Equipment.
- Ships, Shipping Equipment and Sea Vessels.
- Aircrafts and Aviation Equipment.
- Any other form of imported goods.