Export LC Discounting

Export LC Bill discounting is a transaction-specific financing arrangement between the client and the financer. This will relieve the exporter from liquidity problems caused by Usance LC. Through this post shipment credit arrangement customer can get immediate credit of export proceeds once LC is accepted.

Advantages of Export LC Discounting

No need of mortgage or charge creation, funding backed by LC only.

Exporters availing limit from local bank can take benefit of this facility over and above their regular discounting limits.

Funding is done in foreign currency, where cost of funds is very low.

Advantages

Exporter is protected against payment default risk from buyer or from buyer’s bank.

Multiplies receivables Turnover, improves operating cycle resulting in higher production, larger sales, and higher profits.

Process Flow

Buyer's Credit
Decide to opt for Export LC Discounting

Even though the LC discounting is done after acceptance, the decision has to be taken before getting LC opened to ensure hassle free transaction.

Send Query
Send Query to FinByz

Exporter should provide information regarding LC issuing bank and country along with usance tenor to FinByz Consulting before opening of LC.

Quote Letter
Confirm credibility of LC

We will check the credibility of LC issuing bank from the financing bank and confirm if we can handle the LC discounting transaction.

Request your Banker
Confirmation on Costing

We will inform you the best possible rate of interest along with processing fees for the transaction.

Bank Sends LOU
LC Opening

The exporter will liaise with their buyer to open LC with agreed funding terms.

Funding Done
LC Advising

After goods are shipped the documents will be routed as normal LC transaction through your advising bank.

Payment to Supplier
LC Negotiation and Funding

Once the documents are negotiated by LC opening bank and LC is accepted, the financing bank will remit the funds to your bank account.

Repayment
Repayment

On maturity the buyer will make payment to LC opening bank, which will send these funds to the financing bank.

Costing

The overall costing of the export LC discounting will depend on the country of exports and the LC issuing bank.

Further the size of each transaction and overall export volume under LC is also being considered by the financer for negotiating interest.

Generally the cost of funds ranges from L+150bps to L+300bps.

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Mukesh Variyani

About the Author: Mukesh Variyani

A result oriented professional with of experience in Forex Risk Management and Debt Syndication. Having insights of both Corporate and Banking side of Treasury management I help corporates to optimise the strategies of financial risk management and debt syndication through FinByz Consulting.