LC (letter of credit advising) is a common term used in trading, It is a system through which international trading is settled where a third party is involved. The bank acts as a negotiator between you and the beneficiary. The bank ensures that the letter of credit is authentic, safe, and secure.
On application of an LC, the bank ensures that it is delivered to the adjacent bank or its branch office, located in the beneficiaries’ place of stay. The bank that receives the LC is called the Advising bank.
To make it easier to understand, if you are a beneficiary, you will be paid through the bank that the buyer has issued.
An advice letter of credit has many types. Some of them are:
- Revocable letter of credit: It is a letter that can be canceled at any time by the issuing bank without any warning or notice. It is not a safe letter of credit.
- Irrevocable letter of credit: it is a letter that cannot be canceled without the permission of the people involved.
- Revolving letter of credit: with this letter’s help, you can have multiple drafts enacted in one transaction.
- Transferable letter of credit: For those who act as a middle man or are simply negotiating on someone else’s behalf, the payment can be transferred to more than one beneficiary.
Group or individuals:
The following parties are involved while issuing the letter of credit advising:
Applicant: the buyer of the goods.
The Issuing bank: It is the bank that issues the LC.
The Advising bank: It is the bank located in the country of the beneficiary.
The Beneficiary: He sells the good that the applicant is buying.
What is to be considered when applying for an advice letter of credit?
Applicant must be present: If you don’t have an applicant, who is buying the goods? The most basic necessity is an applicant.
Bank branch overseas: It is also necessary that the applicant and the beneficiary have the payment processed through the bank of the same branch.
An economic import order: it is necessary to have an import order issued.
You must have a credit advertising letter when you are considering making a foreign trade. It helps you have a secure and safe transfer. It is imperative in an economic or business trade. It has many features, and there are also some points you need to undertake before issuing an advice letter of credit.