...'s power and leverage, ability to assess credit-worthiness, and his or her ability to collect are ... foreign trade: letters of credit and documentary collection. Letters of Credit. Letters of credit (...
As US companies look to Asia for competitive manufacturing solutions, mid-market companies in the development stage may be unable to negotiate open credit terms from foreign suppliers. Thus, they may require either increased capital from equity partners to finance foreign purchases or senior secured lending facilities coupled with credit enhancements such as a documentary letter of credit, also called documentary credits (DCs). This translates into an opportunity for asset-based lenders (ABL). While the advantages to ABL include international agreements and standardization of the DC issuance and draft process, numerous pitfalls may await the unwary lender. The most common method of a domestic purchaser financing an import transaction is via the documentary letter of credit. A DC can be ...
S. Bankruptcy Court, Western District of New York Chief Judge John C. Ninfo, II, recently participated in a one hour radio documentary titled Bankrupt: Maxed Out in America, which will broadcast at 1 p.m. on WXXI (AM 1370) on Saturday, April 22. Over the past decade, 15 million people declared bankruptcy. That is over double the figure from the previous decade. In the early 1980s, 2 percent of households filed for bankruptcy but by the early 2000s, that number rose to 8 percent.
Documentary , especially for those businesses where traditional open account trading is no longer an option. Letters of Credit are in fact used in some 15% of all international transactions, says David Squibb. The advantage is that they provide a pre-shipment guarantee of payment, and as a result can be used as a vehicle against which further working capital can be raised; the disadvantage is they can be costly, slow, and require considerable attention to detail.
The US imported $1.6 trillion of goods in 2009. While this is down significantly from recent years, importing still has a significant impact on the US economy and is of particular relevance to asset-based lenders as it can lead to an important source of collateral for their borrowers; namely in-transit inventory (in-transits). Importing is also often associated with the use of documentary letters of credit (LC). This article will review the issues associated with the inclusion of in-transits and LCs on the borrowing base (Bbase) and strategies to minimize related risks. During a realization process, an asset-based lender will often incur significant costs to take possession of in-transits. The LC provides assurance to the importer and exporter that payment will occur if, and only if, th...
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