Alternative to Letters of Credit

Letters of credit have been around almost as long as commercial trade itself. However, in today’s digital world, letters of credit can be a cumbersome, expensive and time-consuming tool for facilitating a transaction. More importantly, letters of credit place a burden on your buyers at a time when you want a transaction to go as smoothly as possible.

Consider the following issues buyers can have with letters of credit:

  • It is up to the buyer, not the seller, to obtain and pay for any letters of credit.
  • Buyers must obtain a letter of credit from their banks for every shipment.
  • Letters of credit can tie up the buyer’s lines of credit with its bank.
  • Even the smallest errors or problems with a letter of credit can cause a bank involved to refuse to issue payment once the shipment arrives.

Because of these drawbacks, buyers may resist using letters of credit, especially if they are used to dealing with open account terms that allow payment after they have received a shipment.

The Credit Insurance Alternative
Credit insurance can remove these burdens from buyers and simplify transactions. Using credit insurance, you can:

  • Create the means for easy payment that does not impact buyers’ access to credit.
  • Offer open terms and more aggressive credit limits to your customers.
  • Eliminate the need for invoices or shipping documents, unless a buyer defaults on payment.
  • Ensure that payment is based solely on compliance with the contract of sale.
  • Pursue safe sales expansion and gain access to more working capital to recapture the cost of credit insurance.

Offer your customers the best payment terms and expand your business using credit insurance.