- Trade Finance ( Foreign Trade Financing Solutions )
Letter of Credit
Under the agreement concluded between the buyer and the seller, and in line with the buyer’s request and stipulated terms, a letter of credit constitutes a bank’s undertaking whereby payment is effected through an intermediary bank, provided that the documents evidencing the performance of the relevant goods and services are presented within the specified time frame and in full compliance with the agreed terms and conditions.
As the terms and conditions of the Letter of Credit are determined in accordance with the provisions and mutual agreement set forth in the sales contract between the parties, it ensures that, in the event of non-compliance with the letter of credit terms by either party, the other party is protected from potential loss or damage.
Parties Involved in a Letter of Credit
Applicant: The party that requests the issuance of a letter of credit. (Importer / Buyer)
Beneficiary: The party in whose favor the letter of credit is issued. (Exporter / Seller)
Issuing Bank: The bank that issues the letter of credit at the request of the applicant or on its own behalf. The issuing bank undertakes an irrevocable payment obligation towards the beneficiary, provided that the terms and conditions of the letter of credit are fully complied with.
Advising Bank: The bank that advises (notifies) the letter of credit to the beneficiary upon the request of the issuing bank.
Nominated Bank: The bank with which the letter of credit is available for negotiation, payment, acceptance, or deferred payment; or, in the case of a letter of credit available with any bank, any bank authorized to act accordingly.
Confirming Bank: The bank that provides confirmation to the letter of credit at the request or with the authorization of the issuing bank. Upon accepting this authorization, the confirming bank undertakes an independent and irrevocable payment obligation towards the beneficiary, in the same manner as the issuing bank.
Letters of Credits According to Payment Methods
At Sight Letter of Credit: These are letters of credit under which payment is made in accordance with the letter of credit terms immediately upon presentation of the complying documents within the validity of the credit. If the letter of credit is confirmed, the documents are presented to the confirming bank; if unconfirmed, they are presented to the issuing bank.
Deferred Payment Letter of Credit: These are letters of credit under which payment is made to the exporter at a predetermined maturity date, without the issuance of any draft, provided that the complying documents are presented in accordance with the letter of credit terms. The deferred period may commence from the invoice date, bill of lading date, or the date of presentation of documents to the bank.
Acceptance Letter of Credit: This type of letter of credit allows for the acceptance of a time draft drawn by the beneficiary on the issuing bank or the confirming bank upon presentation of complying documents, with payment to be made at the maturity of the accepted draft.
Mixed Payment Letter of Credit: These are letters of credit under which a portion of the credit amount is paid at the time of document presentation, while the remaining balance is paid at a predetermined maturity date.
- Import Letters of Credit
Within the framework of your approved credit limits, you may benefit from our Bank’s foreign trade services in relation to your import letters of credit, including the preparation of the draft letter of credit text based on your letter of credit issuance instructions, issuance of the letter of credit, handling of documentary processes, and settlement of the letter of credit amount.
- Export Letters of Credit
You may benefit from our Bank’s foreign trade services for export letters of credit, including the advising of letters of credit received from correspondent banks, the addition of our Bank’s confirmation subject to the availability of correspondent bank limits, and the payment of the letter of credit amount.
Discounting / Forfaiting Transactions
These transactions enable the collection of deferred export receivables prior to their maturity. Subject to the fulfillment of certain conditions, such as the presentation of compliant documents and/or confirmation of maturity, non-recourse discounting services may be offered. The structure is based on the Bank’s advance payment to the exporter of export receivables arising from deferred payment export letters of credit that have not yet reached maturity.
Within this framework, exporters are able to obtain fixed-interest financing from the correspondent bank limits under the relevant letter of credit, without utilizing their own allocated credit limits. As a result, exporters strengthen their liquidity while being protected against interest rate and foreign exchange risks, thereby enhancing their competitive advantage.
Acceptance / Aval Credits
An acceptance credit is a type of credit under which, within the scope of the trade credit granted by the seller to the buyer, the importer settles the payment for the imported goods or services at a deferred maturity rather than at the time of purchase.
In other words, acceptance credit is a payment method whereby the price of the goods or services sold is evidenced by a draft, and the draft amount is paid to the seller at its maturity.
All payment methods, except for advance payment, may be structured under acceptance credit terms.
In documentary collections and open account imports conducted under bank acceptance credit structures, the Bank provides an aval on the drafts, thereby guaranteeing payment at maturity.
Within the framework of your approved credit limits, you may benefit from our Bank’s foreign trade services in relation to acceptance/aval credits for your draft or promissory note-based deferred sales, including documentary processing.
You may let your applications reach us via our branches.