LC Discounting Process
A Letter of Credit (LC) helps businesses secure transactions by guaranteeing payments. However, waiting for funds can impact cash flow. This is where LC discounting comes in, allowing businesses to get immediate funds against their LC before maturity. In Mr Karl’s case, his company needed urgent working capital to fulfil new orders. He accessed funds instantly by opting for LC discounting, ensuring smooth operations without financial strain. Let’s understand the LC discounting process in detail through Mr Karl’s case study.
A Case Study
Mr Karl owns the manufacturing unit in South Korea. Produces good-quality aluminium strips. These aluminium strips are used in many industries, including pharma, automotive, electronics, etc. And having a worldwide demand. The company was incorporated 5 years ago and has multiplied its business every year. The current year turnover of the company is around $ 56 million. Mr Karl got an order of $7 million from a mid-sized Indian company. This Indian company has also recently started doing wonderful business. However, not have a long track record in the business. Mr Kamat owns this Indian company. Mr Kamat wants to purchase these aluminium strips, and Mr Karl also wants to sell these.
However, Mr Kamat is not sure whether, if the payment is made, Mr Karl will deliver the goods or not. Mr. Karl is uncertain whether the goods have been delivered or manufactured, or whether Mr. Kamat will make the payment. Both of them are very genuine business companies. Hence, they decided to effect the transaction through LC discounting. So this can give the comfort of the transaction to both Mr. Karl and Mr. Kamat.
Financial Snapshot
Sr. No | Particular I | Particular II |
1 | Buyer | Mr. Kamat |
2 | Buyer Country | India |
3 | Seller | Mr. Karl |
4 | Seller Country | South Korea |
5 | Product to be ordered | Aluminum Strips |
6 | Order Size | $ 7 Million |
7 | Credit Period | 30 days from shipment |
8 | Transaction currency | USD |
LC Discounting Process at Terkar Capital
This was the first time Mr Kamat was entering into an international transaction, and he had no idea how the whole LC transaction would take place. He discussed the same issue with one of his business friends, and his friend suggested that he should approach Terkar Capital. When Mr Kamat approached Terkar Capital, our expert team understood the whole transaction and arranged the issuance of the LC within 24 working hours. We arranged the discounting of the LC from SBI.
The issuance of the LC was so fast that Mr Kamat was able to place and confirm the order in 2–3 working days. Considering the swift confirmation of the order and LC issuance, Mr Karl was also impressed with Mr Kamat’s commitment to the order and decided to prioritise the order. In the next 25 days, Mr Kamat received the order from Mr Karl. Because of the smooth execution of the LC discounting process, Mr Kamat has always trusted the valuable advice of Terkar Capital.
So, whenever Mr Kamat requires any assistance for the LC issuance, he approaches us, and our experts conclude it to be the best.
