What Is The Opening Of Standby Letter Of Credit Monetization?

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What is the opening of Standby Letter of Credit
Monetization?
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• A Standby Letter of Credit Monetization is put
  into operation when a seller and a buyer agree on
  a series of conditions (shipment method, quality,
  quantity, payment method, value). But, in order
  to use this instrument, the buyer must first ask
  his bank to issue a letter of credit in his
  favor. This is what is known as the opening of a
  letter of credit, at which point the bank assumes
  the responsibility of paying the seller when the
  conditions of the transaction are met. In turn,
  the issuing bank notifies the seller's bank that
  there is a documentary credit of which its client
  is a beneficiary.To issue this bank guarantee
  lease, it is common for financial institutions to
  require a guarantee of securities or cash as
  collateral, to which should be added the amount
  of the fee for the service, which generally
  corresponds to a percentage of the amount that
  reflects the letter of credit.

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• What types of letters of credit exist?Different
  types of letters of credit can be posted that can
  be issued by a bank depending on its requirements
  and terms.    Irrevocable. Most letters of
  credit have this nature since the agreement
  established between the parties cannot be
  modified without the prior consent of all the
  agents involved.    Nominative. Those that
  expressly indicate which banks are authorized to
  issue, confirm and negotiate the letter of
  credit. Otherwise, it is said to be a negotiable
  letter of credit.
•     Commercial. When the transaction is a local
  or international purchase and sale operation
  -import or export-.

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•     At sight, by acceptance, or by deferred
  payment. Depending on its availability, the
  documentary credit is qualified at sight when the
  payment is immediate against the presentation of
  the agreed documentation. On the contrary, it
  will be by acceptance when the paying bank
  accepts a bill of exchange issued at a certain
  term, and deferred payment when the payment takes
  place within a certain period after the use of
  the letter of credit (at a certain maturity
  ).    Transferable. In this case, the exporter
  may transfer all or part of his rights to another
  party. In this way, you avoid using your own
  funds to purchase merchandise from your supplier.
  For this, the transfer must be indicated in the
  terms of the letter of credit.

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•     Standby. Colloquially, it could be said that
  this type of bank guarantee lease responds to a
  plan B. It is a kind of bank guarantee used to
  cover financial obligations due to non-payment.
  In general, this type of credit expires after
  twelve months.
• The Standby Letter of Credit Monetization, in any
  of its forms, is a very common resource in
  international trade. Distances and the existence
  of cultural or language barriers can negatively
  affect the trust that develops between the
  parties and, therefore, this instrument is one of
  the best insurances that exist in exchanges
  between actors from different countries, and the
  one that makes It is possible, in many cases,
  that the exchanges continue.

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