How do you Reduce Your International Sales Risk to Almost ZERO?

How do you Reduce Your International Sales Risk to Almost ZERO?

Be Sociable, Share! Tweet Many a USA based small business has received a request to sell their products to a foreign company. Often they are reluctant to do so because they are afraid of not getting paid. To mitigate the risk they invariably ask the buyer to pay up front. But, with a Letter of Credit you can change the rules. There is a better way. Better than getting paid up front? Well in a sense yes. A buyer paying up front is tying up capital and may purchase less or seek a seller offering payment terms (like Net 30). But you can prevent this by offering to sell your goods and allowing the buyer to supply a letter of credit for the transaction. The way it works is thus: The buyer asks their bank to issue a letter of credit (a commitment to pay on their customer’s behalf) with the seller as beneficiary.  The issuing bank issues the letter of credit electronically to the seller’s bank.  The seller then ships the goods to the customer, and sends a copy of the shipping documents to their bank.  The buyer’s bank forwards the shipping docs (which are legal title to the goods) to the buyer’s bank.  Once received, the buyer’s bank notifies the buyer and makes payment on their behalf to the seller’s bank (electronically or by wire) and delivers the documents to the buyer so they can pick up the goods when they arrive.  Most often, the documents arrive well ahead of the product and the seller has been paid before the goods have been received by the buyer....
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