Trade Finance Services

Letters of Credit1

A letter of credit is a document that Popular Bank issued to guarantee a payment. The main purpose of a letter of credit is to provide security to the buyer and the seller in an international trade transaction. A letter of credit represents a payment instrument that constitutes a definite bank undertaking to pay the seller / exporter / beneficiary upon the presentation of documents in accordance with the terms and conditions of the credit. There are several types of letters of credit depending on the purpose of the transaction.

The most common types of letters of credit used are:

Documentary Letter of Credit

Documentary Letter of Credit

Used when a buyer / importer / applicant wants to buy goods or services and the seller / exporter / beneficiary is normally the provider.

Standby Letter of Credit

Standby Letter of Credit

Used as a safety mechanism for the beneficiary, to hedge out risks associated with the trade. A Standby letter of credit is different from a Documentary letter of credit because the main purpose is to only be used as a payment of last resort due to the circumstances under which it is called upon. A Standby letter of credit prevents contracts going unfulfilled if a business declares bankruptcy or cannot otherwise meet financial obligations.

Letters of credit benefits include:

Secures Payments

Secures Payments

Secures payments for services or merchandise and includes the ability to pay in foreign currency

Guarantees Undertaking

Guarantees Undertaking

Guarantees the undertaking of financial or performance obligations

Enhances International Relationships

Enhances International Relationships

Enhances your commercial relations with international clients and suppliers

Timely Transaction Payments

Timely Transaction Payments

Upon presentation of all negotiable documents included in the transaction, Popular Bank will pay in accordance with terms established in the letter of credit

Documentary Collection1

Popular Bank will act as a collection agent in your international trade transactions. We will submit the collection of documents, according to your instructions, to obtain acceptance or payment for sold merchandise or negotiable instruments.

Documentary Collection

Documentary collection benefits include:

Partial Advance Payments

Partial Advance Payments

Importers normally pay for the goods after the shipment in whole, however, it is possible to make a partial advance payment under the documentary collections.

Payment Options Available

Payment Options Available

Generally, there are two payment options available under the documentary collections:

  1. Documents Against Payment (D/P)
  2. Documents Against Acceptance (D/A)

Title Ownership Protection

Title Ownership Protection

The title of goods belongs to the exporter until the exporter is paid by the importer.

Business Insights

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1The issuance of a letter of credit or documentary collection is subject to the applicable rules published by the International Chamber of Commerce (ICC). For additional information please contact our Trade Finance Center today at (305) 938-0121.

The information provided is for informational purposes only, is intended to provide general guidance and does not constitute legal or tax advice. Each person’s situation is unique and may materially differ from the information provided herein. You should seek the advice of a financial professional, tax consultant and/or legal counsel to address your specific needs before any financial or other commitments regarding the issues related to your situation are made. Popular Bank does not make any representations or warranties as to the content contained herein and disclaims any and all liability resulting from any use of or reliance on such content.

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