Documentary credit
A documentary credit is an undertaking by a bank to pay a specified amount to the supplier of goods or services within a specified period, in return for the presentation of documents proving that the goods have been dispatched or the services rendered.
Stand-by letter of credit
A stand-by letter of credit is a signed undertaking by which an issuer undertakes, on the instructions of one of its customers (the originator), to pay a certain amount to a beneficiary at the latter’s request if the originator fails to meet its contractual obligations.
Documentary collection
This is a secure method of payment whereby the seller arranges for the transport (and possibly insurance) documents to be drawn up to the order of a bank, with the bank’s prior agreement. The transport documents are therefore sent at the same time as the invoice, packing list and any other document, with irrevocable instructions to the bank to hand over all the documents to the buyer only against payment for the supply or acceptance of bills of exchange.
Commercial discount
Discounting is a transaction whereby the bank advances to a company the amount of a receivable represented by a bill of exchange, after deduction of agios. The bank repays itself by collecting the bill from the company’s debtor (creditor) on the due date.
Bank guarantees
This is an irrevocable undertaking by the bank to indemnify the beneficiary of the guarantee in the event of default by a foreign business partner. It enables commercial transactions with foreign countries to be made easier and more secure.
