Export Letters of Credit

Export Letters of Credit Overview

What is an Export Letter of Credit?

An Export Letter of Credit is a financial tool that assures you payment by your foreign buyers. A Letter of Credit (LC) is a written agreement issued by the buyer’s foreign bank and provided to you, the exporter. FirstMerit, as the Advising Bank, verifies that the letter of credit is legitimate and that the foreign bank is obligated to make payment based on the terms, conditions, and documentation required under the letter of credit.

Why would I need an Export Letter of Credit?

First and foremost, an Export Letter of Credit protects you, the seller, from a payment default by your buyer, while your buyer avoids having to pay cash in advance for something it has not yet received. FirstMerit can also assist you and your customer’s cash flow situation by confirming and discounting your Export Letters of Credit. Talk to your local FirstMerit International specialist about these enhancements.

Example Scenario

In many foreign countries, the lending rate to your foreign buyers may be much higher than lending rates in the U.S. In such circumstances, you may be able to provide a solution which benefits both your company and the foreign buyer. By offering your customer extended terms, if they agree to a letter of credit worded as you specify, you give your foreign buyer the opportunity to pay over time, which is what most buyers want. Furthermore, by having FirstMerit confirm and discount the Export Letter of Credit, the foreign buy can take advantage of U.S. lending rates. 

The LC can be worded to include language in which all of the costs for these services are paid by the buyer. The buyer benefits by getting both extended terms and U.S. interest rates, encouraging them to buy even more product from you. Your company benefits in that you get paid sooner and with much more certainty within several business days after you submit your documents to us at no additional expense, while at the same time removing the risk of non-payment. Both parties win!.

Our Process

  • As letters of credit are very technical and eventual payment is conditional on numerous factors, we recommend you first speak with one of FirstMerit’s expert International Banking Officers. We would welcome the opportunity to discuss possible solutions with you and your company. 
  • FirstMerit also allows you to receive, track and report your Export Letter of Credit activity online via our Global Trade Portal: e-Connect Global®. Our online system gives you the very latest in electronic visibility and efficiency. With our commitment to technology investment, you can be sure that you have the tools you need to succeed in the online world!

Let’s Talk

 

 

 

Subject to credit approval. Some restrictions apply.