How Are Letters of Credit Used to Finance Your Goods Import and Subsequent Sales?
Approximately 90% of the world’s international trade is financed through some type of trade financing instrument. Trade finance includes credit insurance, export credit, bid and performance bonds, lending, trade-related promissory notes, letters of credit, purchase order funding, bills of exchange, trade acceptance drafts, supply chain financing and invoice factoring.
Trade lines through banks have limits. However, with WIP Funding your company can finance over and above the typical constraints that banks have on funding. We can typically fund all landed costs of goods imported. WIP Funding is a better way to grow a business without giving up precious equity in your company.
For new importers, a letter of credit is a document from a finance company that guarantees a seller or supplier will receive payment on an order if they meet quality, quantity and timeliness parameters. The letter of credit will require you to follow that certain delivery conditions. However, as long as that happens, the finance company guarantees the payment. WIP Funding is able to supply certain customers with letters of credit and they are very valuable when doing business. We get your order moved to the front of the line before unsecured orders.
Once WIP Funding issues a letter of credit, WIP Funding has extended their credit and payment guarantee instead of the company’s credit. This is essential for a new business owner who doesn’t have at least two years of good credit established. Some suppliers will not fill a new company’s order without this agreement, or they give preferential treatment to orders that come with a letter of credit.