About letter of credit
Letter of credit (L/C) gives securance for both transaction partners – exporter and importer. The seller has guaranteed payment in exchange for agreed documents, confirming that the goods have been shipped or services have been provided meanwhile the buyer receives a guarantee that the seller will not receive the payment, if goods or services are not provided in accordance the L/C.
This service is beneficial in case you have a new international business partner or if your cooperation partner requests this type of transaction. L/C is a separate transaction, independent of trade or other agreements – all banks involved in the L/C transaction are working only with documents, not goods or services that these documents refer to. L/C can differ also with the form of payment – you can choose the most appropriate payment for your transaction.
Are you the seller (exporter)?
- The L/C is opened by the buyer and sent to your (seller’s) bank, who will advise it to you. You have to check whether the terms are acceptable.
- You will receive the payment for goods on time. After submitting agreed documents to the bank, the buyer’s bank will pay you the amount specified in your L/C.
- You will be able to manage the company financial flow better. You can offer the buyer to use the deferred payment and the bank can offer you the discounting of the payment.
- L/C can be confirmed to cover issuing banks payment risk.
Are you the buyer (importer)?
- Possibility to avoid advance payments.
- You get the goods at the agreed time and the seller must also fulfill all other contractual conditions according to L/C in order to get the money.
- If you use the L/C for a payment, you can apply for a loan from the bank.
- The seller can improve buyer’s working capital by L/C with deferred payment
- In cooperation with Estonian Business and Innovation Agency (EIS) we offer the option to get additional collateral (guarantee) to companies that need to increase the access to financing solutions.
Title
How does letter of credit work?
Description
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The buyer and the seller enter into a purchase and sales transaction agreeing to use the L/C for a payment.
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The buyer submits an application to their bank to issue the L/C under the conditions agreed with the seller.
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The buyer’s bank makes a decision regarding the issuing of the L/C, based on the latter’s reliability and forwards issued L/C to the seller’s bank.
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The seller’s bank advises the seller of the L/C issuance and the latter checks the compliance of its terms and conditions.
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The seller ships the goods to the buyer as agreed and presents the documents required in the L/C to their bank.
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If the documents are in compliance with the terms and conditions of the L/C, the seller’s bank will forward them to the buyer’s bank which will make a payment against the documents. Once the seller’s bank receives the money, it will transfer it to the seller
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The buyer pays their bank and in return receives the documents accompanying goods.
Simple steps for the buyer to apply
1.
Register for consultation
2.
We will contact and advise you
3.
Send the filled application to info@seb.ee
4.
After a positive decision, sign the agreement if necessary
Import letter of credit |
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| 1. Agreement conclusion and/or amendment | as agreed |
| 2. Fee for issuing a documentary credit and/or a deferred payment with cash deposit | 1% of the amount of documentary credit per year, min. EUR 95 |
| 3. Fee for issuing a documentary credit and/or a deferred payment without cash deposit | determined individually for each applicant, min. EUR 95 per month or a part thereof |
| 4. Handling of documents or their drafts (calculated for each set of documents presented) | 0,15% of the amount of documents, min. EUR 95 |
| 5. Preparation of a draft of a documentary credit or an amendment | EUR 70 |
| 6. Amendment fee (excl increasing the amount and/or extending the validity) | EUR 70 |
| 7. Increasing the amount and/or extending the validity of a documentary credit | issuance and/or deferred payment fee |
| 8. Discrepancy fee (for presenting discrepant documents; normally paid by the beneficiary) | EUR 95 |
| 9. Information processing and forwarding fee | depending on costs, min. EUR 10 |
| 10. Making a payment to another bank (normally paid by the beneficiary) | EUR 32 |
| 11. Default interest (calculated on any debt from the due date until the actual date of payment) | 0,5% per day |
| 12. Services provided to other credit institutions | the fee is set for each individual transaction |
Export letter of credit |
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| 1. Advising fee | EUR 70 |
| 2. Confirmation fee | depending on the risk of the opening bank, min. EUR 95 |
| 3. Preparation of a draft of a documentary credit or an amendment | depending on costs, min. EUR 70 |
| 4. Handling of documents or their drafts (calculated each time a set of documents is verified) | 0,15% of the amount of documents, min. EUR 95 |
| 5. Payment fee upon payment of the amount of documents before the payment date of the documentary credit | 0,1% on the amount of payment, min. EUR 70 |
| 6. Deferred payment fee | EUR 70 |
| 7. Assignment of proceeds | EUR 150 |
| 8. Interest (calculated on the amount of documents paid to the client from the date the payment was made to the client until the date the payment made by the opening bank is received by AS SEB Pank, for a minimum of 10 calendar days) | defined separately for each client |
| 9. Amendment advice | EUR 70 |
| 10. Fee for refusal and/or cancellation | EUR 70 |
| 11. Transfer fee (the client must also pay all other fees according to the export documentary credit price list) | 0.25% of transferred documentary credit amount, min. EUR 95 |
| 12. Information processing and forwarding fee | depending on costs, min. EUR 10 |
| 13. Default interest (calculated on any debt from due date until actual date of payment) | 0,5% per day |
| 14. Services provided to other credit institutions | the fee is set for each individual transaction |
Documentary Credits are governed by the Uniform Customs and Practice for Documentary Credits, Pub. No 600, issued by the International Chamber of Commerce, Paris 2007.
NB! The services charges of another bank may be added if another bank is used. AS SEB Pank reserves the right to charge for additional services and/or time-consuming transactions in addition to the price list.
Other ways to finance your trade
Factoring
Change your invoices into cash flow. Offer extended payment terms to your clients, without reducing your working capital or sales volume.
Documentary collection
A payment form which a seller/buyer can use to strengthen their position in a trading transaction.
Bank guarantees
Guarantees provide your trading partners the commitment of SEB to pay to them in specified situations.
Options to finance your business’ purchases
Overdraft
Flexible option for using extra cash, offering the possibility to have a negative balance on company’s account for financing working capital.
Working capital loan
To cover temporary shortage of working capital or expenses.
Need advice on financing?
- Our specialists will help you find the suitable financing solution for your business.
- We have a dedicated team of professionals you can trust
