Documentary credit is a financial method that makes international trade easy for importers and exporters. If you are thinking about selling products in other countries, or buying supplies documentary credit is mandatory for you. This document allows exporter and importers to have better conditions and fewer worries about international trade.

Apart from the documentary collection as a means of payment and not a means of financing, companies can finance their imports by documentary credit, the advances in foreign currency bonds and customs.

International trade using documentary credit also involves other forms of documentations that prove that the transactions were finished as expected. For importers to have the right to take the merchandise they bought from the port, they need to show custom documents, certificates, etc. Exporters bring the documents along with the merchandise, banks review them, and if they agree with the conditions they proceed to payment.

Documentary credit gives advantages to the seller because he or she is guaranteed that the bank will pay for the merchandise even if the buyer does not have the money at the moment.

If the exporter fails to present the documentary credit at the moment of arrival at the port of arrival, he or she risks non-payment for the merchandise.

Without documentary credit, the seller has two choices when the buyer defaults payment: one is to the take the merchandise back, the other one is to find another person in the port of arrival that is interested in buying the good from him or her.

Documentary credit evidences the agreement between the importer and the exporter via the banks of each part and guarantees the payment for the goods. The document is required both for payment and for reception of the merchandise.

The documentary credit is a credit signature. The standby letter of credit is used often to replace the other international credit documents. Its mechanism is similar to that of documentary credit and can serve as a useful instrument of payment default and replace in some cases.

These types of documents are designed to provide equal protection to importers and exporters. Through them, they agree on the terms and conditions of the transaction with the bank of each of the parts. The bank assumes the responsibility for payment if the credit is granted.