TRUTH BEHIND UPFRONT PAYMENT - Without upfront payment can LC be issued? - For Your Read

No Upfront Payment is Myth.

It is highly unlikely that a bank will issue a Letter of Credit (LC) without requiring some form of upfront payment or collateral from the applicant.



Banks typically require some form of security or collateral from the LC applicant to mitigate the risk of non-payment. This may include a cash deposit, a performance bond, or other forms of collateral. The specific requirements may vary depending on the bank, the nature of the transaction, and the creditworthiness of the applicant.

In some cases, a bank may issue an LC without requiring an upfront payment if the applicant has an established credit history with the bank and a strong reputation for paying their obligations. However, this is relatively rare, and the bank will still require some form of security or collateral to minimize their risk.

It is important to note that there are many scams and fraudulent schemes that involve fake or non-existent LCs, and that it is important to conduct thorough due diligence and work with reputable and experienced financial institutions when applying for and using LCs for trade finance.
No Upfront Payment is Myth.

 

Regards
Arasan, Trade Finance Consultant
+91 9345516057

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