Letters of credit

A convenient payment method to reduce transaction risk in international trade!

Rates

A popular payment method in international trade

Minimises potential transaction risk

Scheduled payments and timely receipt of goods and services

Ensures compliance with international rules

How do I issue a letter of credit?

1.
Agree the terms and conditions with your business partner
The seller and the buyer sign an agreement providing for payment by letter of credit.
2.
Visit our branch
Visit your nearest bank branch for a consultation at a time convenient for you. Submit the completed application for the issuance of the letter of credit and other relevant documents.
3.
Get confirmation of a letter of credit issued by your bank
The bank, having deposited the buyer’s funds in a special account or provided a credit line for the issue of letters of credit against which assets acceptable to the bank are pledged, will issue and deliver the letter of credit to the seller’s bank.
4.
Accept the documents or goods/services
The seller’s bank notifies the letter of credit to the seller > The seller delivers the goods/services to the buyer and submits the documents specified in the terms of the letter of credit to his/her bank > The seller’s bank sends the documents to the buyer’s bank > The buyer’s bank verifies the documents, and, if they are consistent with the terms of the letter of credit, deducts the funds from the client’s account, transfers them to the seller’s bank, and delivers the documents to the buyer > The seller’s bank credits the funds to the seller.

Frequently asked questions

A letter of credit is an irrevocable commitment by the bank of the buyer (importer) to pay the amount of the letter of credit to the seller (exporter), subject to the seller’s presentation of documentation that satisfies the terms and conditions of the letter of credit.

The Uniform Customs and Practice for Documentary Credits (UCP 600, 2007) govern the proceedings relating to letters of credit.

  • The bank only pays to the seller (exporter) when the seller provides documentation that meets the terms and conditions of the letter of credit.
  • The buyer (importer) can control the deadlines for dispatch of goods (provision of services).
  • In the event that a letter of credit is issued with a deferred payment clause, the buyer (importer) has the option to make payment after the sale of the goods (the seller (exporter) credits the buyer (importer).
  • The seller (exporter) has an irrevocable obligation from the bank of the buyer (importer) to pay for the goods shipped (services provided).
  • The seller (exporter) can calculate/set the exact date of payment.
  • In the case of a long-distance transport of goods, payment may be received before the goods reach the buyer (importer) (the buyer (importer) credits the seller (exporter)).
  • The seller (exporter) may use a letter of credit as an additional instrument to raise short-term financial resources.
  • The bank and the seller (exporter) shall enter into an Agreement of Letter of Credit Document Prepayment, which sets out the general terms and conditions of deferred letters of credit.
  • The letter of credit must be endorsed by Urbo Bank UAB (at the request of the issuing bank (the bank of the buyer (importer)) or the customer (the seller (exporter)), i.e. the risk of the issuing bank (the bank of the buyer (importer)) must be acceptable to Urbo Bank UAB.
  • Documents submitted under a letter of credit must comply with the terms of the letter of credit or any inconsistencies therein must be accepted by the buyer/importer.
  • The bank pays up to 100% of the value of the documents, minus discounting.
  • The discounting of documents can be combined with a credit to the customer (seller (exporter)) by means of a bill of exchange.

Have any questions?

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