Ranging from small to large-sized businesses requires working capital. The term working capital is appearing in many areas. It has changed as per the convenience of the participants. In today’s time, “working capital facility” has turned into the fund based as well as non-fund based. LC Discounting is one of the best and most convenient non-fund-based credit facilities. The borrower can avail of this facility from the bank.
As per the Indian market scenario, being a developing nation; small to medium to big business exists here. Due to lack of proper financial arrangements, small and medium businesses are struggling. Thus, it can impact the overall profitability of the country’s economy.
Key features of LC Discounting India
Do you know? A letter of credit discounting India plays a vital role in working capital, mainly when you’re dealing with international business. Below are a few of the important features of LC:
1. LC is issued against the collateral or FD. This is because, if by means the buyer defaults on making the payment the issuing bank has to make the payment to the advising bank. The issuing bank wants to safeguard its risk of issuing a letter of credit.
2. There are certain charges charged by the opening bank for issuing a letter of credit. The charges depend on the type of LC, bank and the amount, etc.
3. Time to time there are many guidelines issued by the International Chamber of Commerce, which intend to smoother international trade.
4. The payment of the LC is more dependent on the correctness of the documents and not on the quality of the goods and services.