Letter Of Credit Financing: How It Works

 In Purchase Order Finance, Trade & Inventory Finance

Do we offer Letter of Credit financing?

Yes we certainly do.

In this video you will learn:

1/ How our product differs from the banks

2/ What our requirements are

3/ Who this product is best suited to

Watch the video/read the transcript or take a look at the diagram below!

For an appointment with a Product Specialist, call the office on 1300 652 158

Hi, I’m Daniel from AR Cash Flow, and today we’re going to talk about letter of credit financing. Why exactly do we offer this product? The main reason we offer it is to give small businesses the opportunity to access capital lines that are usually only reserved for bigger companies.

So, moving on from there, who are we offering this product to? We’ve got a little picture here of Don’s Drinks. He imports beverages from overseas and sells it within Australia or wholesales it within Australia. But he could be importing any kind of widget or finished product from overseas.

So, where do we offer these letters of credit? The supplier can be pretty much anywhere in the world. We do have some coffee importers and their supplies are in South America. For example, we do have suppliers in Europe and also Asia. However, the thing that must be Australian is our client.

So, what’s the difference, you might ask, between us financing a letter of credit and you going to the bank and getting a letter of credit? The main difference is collateral. With a bank-type product you have to put up dollar for dollar security. If there’s foreign exchange risk, you’re going to be asked to put up $1.10, maybe even $1.20 worth of security for every $1 of letter of credit issued. That’s the main difference. All we need as collateral is the usual financial requirements that most lenders require, without the need for property security, and also usually we’ll want the goods that we’re purchasing covered by a purchase order.

So there you have it. That’s how we offer letter of credit financing. For more information, visit our website at ARCashFlow.com.au. Visit our Facebook page at Facebook.com/ARCashFlowTrade, or give us a call on our 1300 number for an appointment. Thanks for watching.

In case you’re wondering, this is cheese and this is chalk.


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