Documentary Letter of Credit

• A suitable security and payment tool that minimizes the risks associated with a business relationship, especially with an unfamiliar business partner and in a higher-risk area.
• The issuance of a Letter of Credit in favor of the seller enables you to negotiate more favorable conditions with your business partner for the commercial contract (e.g. deferred invoice maturity).
• Payment by the buyer is guaranteed by the bank, i.e. the seller has a receivable towards the issuing bank rather than the buyer.
• It ensures the buyer that payment will be made only upon fulfillment of all the conditions prescribed by the Letter of Credit.

• If the seller's bank confirms the Letter of Credit, the seller will be released from the risk of the buyer’s failure to pay.
• By appropriate documents the buyer can put pressure on the seller to make the delivery on the set deadline and in the required quality.
• The bank may purchase the seller’s receivable from the export Letter of Credit (with deferred maturity), which means a shorter maturity for the seller.
• In the case of letter-of-credit transactions, the legal relationships between the buyer and the seller are governed by the Uniform Customs and Practice for Documentary Credits published by the International Chamber of Commerce in Paris.

A Documentary Letter of Credit

Is a bank’s irrevocable written obligation to the supplier of goods or services to pay a certain financial amount according to the Letter of Credit conditions, provided that the recipient of the Letter of Credit (authorized supplier) furnishes the documents set forth in the Letter of Credit conditions.

Use of Letter of Credit

The documentary Letter of Credit is usually used by an exporter or importer in transactions where documents are to be furnished that guarantee the ownership title to the goods or their quality, etc. The Letter of Credit may also be used in trading in real property, securities, share transfers, i.e. in cases where a bank's pledge for payment is required.

• Export Letter of Credit
  if you are in the position of a seller (exporter) you will receive via Tatra banka a Letter of Credit issued in your favor by the buyer's bank (importer). By confirmation of such Letter of Credit upon request Tatra banka, after consideration, takes the risk of the consequences of non-payment on the part of the issuing bank (assuming acceptance of documents in line with the Letter of Credit conditions),
• Import Letter of Credit
  if you are in the position of a buyer Tatra banka will, upon your request, issue a documentary Letter of Credit in favor of the seller,
• Real Estate Letter of Credit
  used to purchase or sell real property, usually in Slovakia,
• Stand-by Letter of Credit
  a function similar to a guarantee. It is suitable mainly for repeated deliveries under one contract. This type of documentary Letter of Credit with the nature of a guarantee is used mainly in the USA where the issuance of bank guarantees of the European type is not permitted by law,
• Transferable Letter of Credit
  the rights from the Letter of Credit may be transferred by the original beneficiary to another person. It is suitable for dealers/mediators.