Many businesses purchase product inventory or other manufactured items from domestic and international manufacturers that require a large cash deposit or some form of financial guarantee before they will begin manufacturing the products.
A letter of credit, sometimes known as a bank letter of credit, is issued by a financial service company and guarantees that a payment required for the delivery of goods will be received on time and for the correct amount. A letter of credit provides a buyer of inventory an assurance that the products will be manufactured and delivered in strict compliance with the specification of the purchase order. A properly issued letter of credit is a time-tested form of financial guarantee that will be accepted by most manufacturing companies as sufficient assurance that they will be paid when the goods are delivered.
Letter of credit financing offers several benefits:
1. A letter of credit allows a business to purchase inventory and other manufactured goods without tying up the cash or other assets of the business.
2. A letter of credit provides a business with additional assurances that the goods being manufactured will be delivered in compliance with required production specifications.
3. A letter of credit allows even a small business to negotiate favorable product manufacture and delivery terms with large domestic and international manufacturing companies.
4. A letter of credit can eliminate concern about currency fluctuations and exchange issues.
5. The exacting demands required for negotiation of a letter of credit discourage manufacturing companies from making late or incomplete deliveries.
The pledge of a letter of credit can serve as full satisfaction of buyer obligations related to deposits and final payment.
Setting up a letter of credit is quick and easy. Here is what we need:
1. Your company must have been in business for at least 1 year and must be actively generating accounts receivable.
2. We need a signed application containing information about your business and its owners. When we receive this information, we will quote fees and a letter of credit agreement will be put in place.
3. We need complete information and copies of documents detailing the goods being manufactured, who is making them, how much they cost and the delivery date.
4. When the amount of the letter of credit is determined, a sufficient amount of invoices need to be assigned to DBR to cover anticipated monthly payments.
5. When everything is in place, the letter of credit will be issued.
If everything goes smoothly, we can set up a new letter of credit transaction within 3-4 days.
Acquire a letter of credit for your business
DBR’s sister company, Diversified Capital Resources, LLC can provide your business with a letter of credit for all your business needs. DCR is a California Licensed Lender company operating under License # 603K778 that provides line of credit funding and other forms of business funding for many of DBR’s clients.
No matter what credit problems you may have had in the past, it is rare that something in your past will prevent DCR from finding a way to get you the letter of credit you need.
Business experts always say: “The one thing that makes the difference between a successful company and a company that is struggling is having access to adequate business capital.”
The first step for issuance of a letter of credit for your business is submission of an application so we can quickly qualify your business and tell you how much letter of credit funding we can provide. Click the link below to submit an application for the funding you need.
A Letter of Credit preserves your cash. A Letter of Credit gives you manufacturing control.
A Letter of Credit will reduce personal stress. A Letter of Credit is based on your accounts receivable.