5 Things To Make Sure Of When Writing A Letter Of Credit

A letter of credit is a document that states that one bank promises to pay another bank for a payment to a customer. This is documents is frequently used in international transactions where a party has an obligation to deliver a good or service before a payment is made.

This makes it very popular in the shipping industry, but it is also used in cases involving the transfer of real estate and the ownership of businesses. Because of the importance of letters of credit it is important to know some important things about drafting them.

Use a Template
The complexity of a letter of credit means that it a good idea to use a template. These templates show how to format a letter of credit, and they also offer n idea of what should be included in them. There are many letter of credit applications, and some of them are exceptionally useful. There are letter of credit applications where certain words simply need to be substituted in. There are even letter of credit templates that allow for one to check boxes and fill in places with a pen. This means that one can generate a letter of credit inside of a few minutes without needing to format and print one out.

Include the Names and Information of All Parties Involved

The next thing to make sure of is that the letter of credit application contains the full names of the all of the parties involves. The application should contain full names and addresses for all persons involved. It should also contain the full name of a business with any kind of identifying initials placed after the name the first time it is given. The address of the business should be given, and the full name and contact information of the employee who is in charge of the transactions associated with the letter of credit.

State the Form and Time of Payment
The form should contain specific information on how much should be paid, and because letters of credit are used in international applications they should contain the type of currency. The form should also clearly state that the amount needs to be paid upon presentation of the letter of credit, or at a specific time.

State Other Required Documents
The letter of credit should state what documents need to be presented with the letter of credit in order for money to be paid out. This will generally include an invoice stating that the goods were delivered, or a finalized contract stating that the deal is completed. These letter of credit should specifically state each documents, and it should not leave room for other documents that the bank may request in order to falsify the letter of credit.

A Transfer Clause Should be Included
The letter of credit should state who can cash the letter of credit. It should also leave room for one to sign over the letter of credit to another person. This space should contain a place for a signature and date. This will allow for another person to cash the letter of credit if the circumstances require one to do so.