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International Trade Finance: Purchase Order Financing
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About International Trade Finance


 What is a Letter of Credit?

A Letter of Credit promises payment to your company’s supplier, so long as your supplier performs according to your order as specified on the Letter of Credit. A Letter of Credit essentially substitutes the credit of a third party, usually a bank or finance institution, for that of a borrower. This serves three purposes:

Credit
Your supplier gains assurance that it can now ship to you on an open account, instead of demanding T/T payments prior to shipment. Upon shipment, the supplier will present shipping documents and request payment directly from International Trade Finance, not your company.

Guaranteed Performance
The Letter of Credit guarantees you that the supplier must perform, and perform on time, before it can ask to be paid. If the order is incomplete or late or has any number of various discrepancies, your company has the option to reject the shipment and refuse to pay.

Growth
Letters of Credit allow you to build relationships with new suppliers and obtain the credit needed to allow your company to keep up with the growing demand for your product.

Opening a Letter of Credit with a bank requires either that your company qualify for a conventional line of credit, or that you secure the Letter of Credit with cash. Many companies in need of Purchase Order Financing do not meet the prerequisites of bank lines. The ones that do prefer not to allocate a large sum of the line to secure the Letter of Credit when the resource can be used more productively elsewhere. And most companies would certainly rather have cash available for more important needs than have it sit idle with a bank to secure a Letter of Credit.

International Trade Finance covers the costs of your Letter of Credit with your buyer’s purchase order. There are no application or upfront fees. Once your supplier ships the goods, your company can fill the purchase order, and International Trade Finance is paid from the generated invoice whether from the buyer or from a Factor. We keep only the costs of the Letter of Credit and our fees. The rest is remitted to you immediately as your profit.


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