Letters of Credit
What do you do if you are about to import goods and your supplier requires a form of security. In
such cases a letter of credit is your solution. The exporter will be paid for goods shipped/services
rendered only upon presentation of documents that have been pre-described in a letter of credit.
Once it has issued a letter of credit, the importer's bank then acts as guarantor for payment.
Payment that rests on a letter of credit depends on the documents presented at the bank and not on
the quality of the goods delivered or the services rendered.
Bank guarantees
A bank guarantee, also known as a bond, obligates the bank to pay a sum of money if applicants fail
to fulfill their obligations. The beneficiary may claim the guarantee by presenting copies of unpaid
invoices and or other documents relating to the transaction. There are many different kinds of
guarantees such as; advance payment guarantees, performance bonds, maintenance bonds, etc.