Guarantees are the safest way to ensure that you do not loose when contractual agreements are breached. A standby letter of credit provides the safety net you require to avoid losses and ensure that you recover your money in case a contract is not honored. Goodwill is not always the best way to approach business.
This form of security is used in such industries as construction, shipment and service delivery. The giver promises to make payments in case the terms of the deal are not fulfilled. The best parties to give such a commitment at the international level are financial institutions or firms operating in both jurisdictions where this transaction is being carried out.
As a beneficiary, you will not suffer any loss in case the contractor fails to deliver the goods, complete a project or meet certain conditions. The banker has evaluated the creditworthiness of the contractor and identified his ceiling. The assumption is that this contractor will make payments to the bank after it releases the money to you.
An example is a contractor engaged in Dubai with a strict construction deadline. The contract also stipulates the quality of work to be done. Delays in completing such a project would lead to huge losses. The owner has to hire another contractor to finalize an abandoned project. It is the bank that reimburses the money to cover for such breach and cushion the investor from loss.
The letters are cushions against breached trust. There are reasons why the contractor may fail to pay in case the transaction or project does not go as planned. He is likely to be waiting for his customers to pay him and is therefore facing a financial crunch. You are assured that you have a buffer for your finances and projects.
There are cases where suppliers or contractors go out of business before fulfilling their contractual agreements. As a client, you do not have the mandate or capacity to attach their assets and recover your money. It is likely that you do not have the resources either. The process of recovery is also likely to cost you a lot of money and time. Banks have the infrastructure, mandate and the network to make such a recovery.
The political environment may cause the freezing of assets owned by your supplier or contractor. When you disagree beyond reconciliation, execution of such a contract becomes difficult. Some contractors are plainly deceitful and dishonest to the point of dishonoring contracts. These circumstances require cushioning to cover for any losses that may arise.
There are conditions set by banks to facilitate payment. The client must proof that certain conditions were breached and thus the situation warrants compensation. A standby letter is not used unless the need arises, which is in extreme cases.
International trade uses commercial letters on a large scale while domestic trade uses standby letters. Your bank will issue the letter and give you conditions before it is released. It is prudent and safe to demand one when working on different contracts regardless of their value. You have a safety net in case something happens.
This form of security is used in such industries as construction, shipment and service delivery. The giver promises to make payments in case the terms of the deal are not fulfilled. The best parties to give such a commitment at the international level are financial institutions or firms operating in both jurisdictions where this transaction is being carried out.
As a beneficiary, you will not suffer any loss in case the contractor fails to deliver the goods, complete a project or meet certain conditions. The banker has evaluated the creditworthiness of the contractor and identified his ceiling. The assumption is that this contractor will make payments to the bank after it releases the money to you.
An example is a contractor engaged in Dubai with a strict construction deadline. The contract also stipulates the quality of work to be done. Delays in completing such a project would lead to huge losses. The owner has to hire another contractor to finalize an abandoned project. It is the bank that reimburses the money to cover for such breach and cushion the investor from loss.
The letters are cushions against breached trust. There are reasons why the contractor may fail to pay in case the transaction or project does not go as planned. He is likely to be waiting for his customers to pay him and is therefore facing a financial crunch. You are assured that you have a buffer for your finances and projects.
There are cases where suppliers or contractors go out of business before fulfilling their contractual agreements. As a client, you do not have the mandate or capacity to attach their assets and recover your money. It is likely that you do not have the resources either. The process of recovery is also likely to cost you a lot of money and time. Banks have the infrastructure, mandate and the network to make such a recovery.
The political environment may cause the freezing of assets owned by your supplier or contractor. When you disagree beyond reconciliation, execution of such a contract becomes difficult. Some contractors are plainly deceitful and dishonest to the point of dishonoring contracts. These circumstances require cushioning to cover for any losses that may arise.
There are conditions set by banks to facilitate payment. The client must proof that certain conditions were breached and thus the situation warrants compensation. A standby letter is not used unless the need arises, which is in extreme cases.
International trade uses commercial letters on a large scale while domestic trade uses standby letters. Your bank will issue the letter and give you conditions before it is released. It is prudent and safe to demand one when working on different contracts regardless of their value. You have a safety net in case something happens.
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When you need a standby letter of credit to be sent out to your client, let us guide you by introducing this web page. Get all the specifics from the official website at http://www.bwtradefinance.com.
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