FAQ

I generally open letters of credit through my bank. How are your letters of credit different?

The letters of credit that we open are opened using our bank accounts at prime banking institutions. When you open the letter of credit through your bank, you use your credit line. When you open through us, you use our credit lines.

Why do I need to pay your fee before you open the letter of credit? Can't you take your fee out of the profits of our transaction?

We do not participate in the transactions of our clients as a party to the transaction other than a provider of certain financing. Therefore, we do not participate in the profits of our client’s transactions. Our fees are the same regardless of the profit margin in the transaction.

Can I cancel my letter of credit after it has been opened?

All of the instruments that we issue are irrevocable and cannot be cancelled except by the beneficiary.

What type of collateral do you require to open a letter of credit?

In most cases we do not require a specific collateral deposit to open a letter of credit. We offer transactional based finance. When a client wishes to open a letter of credit, he presents us with the details of his transaction so that we can make a decision about the transaction on its merit. The final decision by our company to enter into a transaction is made according to a set of criteria.

What is the charge for opening a letter of credit?

The letter of credit charge depends on a number of factors. We can provide you with details once communication has been established.

What is the maximum size letter of credit that you open?

We are able to open letters of credit of almost any size. We consider the complexity of the transaction; the goods that are being trades; and, other factors having to do with the parties to the transactions and where they take place.

For what type of goods do you open letter of credit?

We can open letters of credit for any type of goods provided they fall into our ethical and legal criteria. That said, we will not get involved in transactions involving weaponry or ammunition under any circumstances.

I opened a letter of credit to my supplier, but he did not ship the goods. Will you refund my fee?

Once the letter of credit is opened your fee cannot be refunded. We recommend to all of our clients that they need to assure themselves of their suppliers’ ability to perform before opening any banking instruments to them.

How to use our letter of credit?

Sample Procedure for Express Capital Group Letter of Credit

The following is a detailed summary of the steps involved in a purchase order transaction that is paid for by letter of credit and the benefits to the seller and supplier.

Terms:

Beneficiary – This is the person or company that is paid under a letter of credit when all conditions are met.

Issuing Bank – This is the bank that issues the letter of credit and checks the Documents presented by the Beneficiary through its Advising Bank.

Advising Bank – This is the Beneficiary’s bank. The Issuing Bank corresponds with the Beneficiary through the Advising Bank.

Documents – Each letter of credit lists specific documents that the Beneficiary must produce in order to trigger payment under the letter of credit. These normally include, among others, a bill of lading, commercial invoice, packing list, and certificate of origin.

Transaction Structure

1. Your company enters into a purchase agreement with your supplier

2. Your company completes an Application for an Irrevocable letter of credit with information pertaining to you transaction and then submits it to Express Capital Group for processing.

3. The letter of credit is usually issued within 24 hours of the time we receive your completed application. Upon issuance, the Issuing Bank sends the letter of credit to the Advising Bank electronically.

4. The Advising bank establishes the authenticity of the letter of credit and informs the Beneficiary (i.e., your supplier) that it has been received.

5. Your supplier produces and ships goods to your company against the letter of credit.

6. The Supplier / Beneficiary presents the Documents to the Advising Bank for payment under the letter of credit.

7. The Advising bank sends the Documents to the Issuing bank which checks to make sure they conform to the terms of the letter of credit.

8. Your company pays Express Capital Group for the amount drawn under the letter of credit or has previously made arrangements for extended credit terms.

9. Express Capital Group through the Issuing Bank releases the Documents to your company and the Issuing Bank wires the funds to your Supplier through its Advising Bank.

Comparison methods of payment

Method
Goods Available
~Time of Payment
Risk to Exporter
Risk to Importer
Cash in Advance After Payment Before Shipment Very Low Maximum – Relies on exporter to ship goods as ordered
Letter of credit
*Confirmed
*Unconfirmed
(Advised) 
After Payment When documents are available at shipment Very Low Assured of quantity and quality of shipment if inspection report is required
Documentary Collection Sight Draft Documents against Payment After Payment On presentation or draft to importer If draft unpaid, goods must be returned or disposed of, usually at loss Assured of quantity, also quality, if goods are inspected before shipment
Documentary Collection Time Draft Documents against Acceptance  Before Payment On maturity of draft Relies on importer to pay draft Minimal – Can check shipment for quantity and quality before payment
Cosignment  Before payment, exporter retains title until goods are sold or used After use; inventory and warehousing cost to exporter Substantial risk unless through foreign branch of subsidiary Very Low
Open Account Before payment As agreed Relies on importer to pay account as agreed – complete risk  Very Low