How safe and secure are "Inland Letter of Credit". Can people please share their experiences?
I have a client which is an Indian company that wishes to place an order on me and want to transact thru a Letter of Credit! How safe are these and what would friends on the hub suggest?
It all depends on the bank that is issuing the LC. I have set up a few in the past of 10mill+ and they seem to be a viable source of funds for building a business.
Make sure it is real before you ship out anything. a good law firm is worth the money to hire in a case like yours. Hope this helps.
Any LC is only as secure as the bank or the person issuing it. So, if the issuing bank is sound and reputed, there shouldn't be much of an issue. Further, you should first check with your bank i.e. the seller's bank as it all depends on the seller's bank. You will get your money only if your bank approves it. You can ask for a proforma format of the LC from the buyer and show it to the seller. Also, if you and your buyer have bank accounts in the same bank (different branches) then the process can become that much more easier.
Also, in some big-ticket transactions, there are advising bank in the middle (like a financial intermediary) who make it all happen. They can provide you good advice on this.
In summary, first go to your bank who will ultimately, settle the transaction for you.
Familiar with and have used used a Letter of Credit (LCs) before, but not familiar with an 'Inland' LC. Maybe if you explain that a little better, I can help you. Also, what entity is issuing the LC, i.e. a bank, the Indian company, etc.? We recently arranged an LC for a client through a private capital lender, they work quite well, depending on the issuing bank and the method the LC is to be leveraged. Dave Cochran, Cochran Edwards Capital Partners, Seattle