Reduce Your Commercial Risk With An Import Letter of Credit

As an importer, you may have concerns about conducting business and negotiating payment terms with unfamiliar foreign suppliers.

RBC can help your business manage these concerns by limiting your financial risk and helping to improve your cash flow.

Structuring an import letter of credit (also called an L/C or documentary credit) is an excellent way to ensure your company does not pay for goods until the supplier provides evidence that the goods have been shipped.

RBC's trade experts can provide you with the advice and expertise necessary to use import letters of credit to make your international purchasing process more efficient.

An import letter of credit is a document issued by a major bank on behalf of an importer, or buyer. The import letter of credit guarantees an exporter payment for goods or services, provided the terms of the letter of credit have been met.

By using an import letter of credit for your international purchases, you can:

• conserve your company's cash flow by eliminating the need to make advance payments or deposits
• strengthen relationships by demonstrating your company's creditworthiness to suppliers
• support your suppliers' access to bank credit, since in many countries, letters of credit are pledged by exporters as security against working capital loans

Structuring an Import Letter of Credit

Incorporating an import letter of credit for your international purchase is a simple way to help reduce your commercial risk.