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A credit letter is a financial contract between a bank, its customer, and a beneficiary. It guarantees that payment to a seller shall be received by the buyer on time and for the correct amount. If the buyer is unable to make the payment on the purchase, then the bank shall be required to cover the amount of purchase. To make sure that your credit letter is properly written, browse through our library of templates and pick the one that suits you best. Register on our website now to gain access to our editable files and templates.
A letter of credit is issued by an importer to a bank, which is sent to an exporter’s bank with details regarding the payment and other obligations to be met by the exporter. Letters of credit are common in international trade, to safeguard the parties against poor service and fraudulent practices. Here are some tips in writing the credit letter:
Maintain a professional tone no matter what the circumstances: whether the person involved is approved, denied, or discontinued credit, or even when the collection process has begun. A good relationship with your customer will ensure that you keep his business. In case you deny or discontinue a request for credit, for instance, you may leave the door open to future applications to continue their business.
If the customer is more than a month late in payments, encourage them to contact you to discuss the lapse. If the payment is past 60 days overdue, with no move toward making payments on the customer’s part, let him or her know the repercussions of such late payments. Do not make empty threats unless you are prepared to follow through.
To avoid any miscommunication, make sure that you are clear in your letter and include all information necessary to convey your request or offer to your client. Refrain from creating general letters and instead, cater your letters specifically to each client or customer. Follow a more formal type of writing by being confident and persuasive in your letters, but keep each correspondence brief and straightforward.
Credit letters should be written professionally: you should be able to have a good command of the language used, so check your grammar and spelling before sending the letter to the client.
A letter of credit is a letter that is issued by a bank to another to serve as a guarantee for payments made by a client to a specified party under previously agreed-upon conditions.
A letter of credit allows an individual or business entity to expand the business safely while ensuring that the seller is free of risks as payments are assured in cases of disputable transactions.
The letter of credit is used mostly by long-distance and international commercial transactions, allowing the reduced risk of non-payments to the seller for non-payment of goods.
A bank guarantee serves as a promise from one commercial bank that it will assume liability for a debtor in case the contractual obligations are not met.
The issuing bank is the one that issues the credit, and this is usually done so following a request from a client or an applicant. A letter of credit can be as long as 90 days, but this will depend on the arrangements with the bank: some letters of credit can be good for only 30 days.