Two enterprises have signed a contract of sale, enterprise A to enterprise B to order a batch of goods, then enterprise A, B corresponds to the above chart of the importer and exporter.

The problem, however, is that the two companies are not in the same country, and have never dealt with each other, and they don't know each other's details, which makes the transaction risky, and inevitably gives rise to a variety of concerns.

A thinks that if B can't deliver on time, then he can't get back to work on time, and B is worried that if the goods are sent out, A won't pay for them.

You see, this situation and Taobao shopping, is not the same?

Then the two sides of the most trusted is the bank, this time A to find a trustworthy local banks, such as Industrial and Commercial Bank of China as the issuing bank, apply for the opening of a letter of credit, the enterprise B also find a local bank as a notification line.

After receiving the application, the issuing bank will comprehensively assess the credit rating of the enterprise A, and give a credit limit, similar to the personal credit card limit, if the amount applied for in the range of credit, on behalf of the letter of credit opened successfully, the Industrial and Commercial Bank of China will be sent to the notification bank a telegram.

When the notifying bank receives the telegram, it will notify exporter B that the letter of credit has been received and can be shipped.

The exporter ships the goods and gets a bill of lading from customs.

One hand to pay, one hand to pay, the exporter will bill of lading to the notifying bank, the notifying bank to pay the exporter

The notifying bank to the issuing bank to mail the bill of lading, and demand remittance, the issuing bank to review the documents are correct to pay

The issuing bank to receive the bill of lading, the importer to take the money to redeem the bill

Importers take the bill of lading to the port of pick up, so that a letter of credit business Formal end.

Then why would the bank be willing to act as a middleman, because it is profitable ah, in the whole business flow, whether it is the issuing bank or notification of the bank, will charge a lot of fees.

Not only that, but there are all sorts of scenarios in between, such as the importer's momentary cash flow shortage, can't pay how to do? It's okay, I'll give you a loan.

If the goods have been to the port, but the bill of lading has not been sent, the port cargo warehouse fees are very expensive, how to do? It's okay to give money to me to guarantee that you first pick up the goods.

Exporters have orders, but no money to buy raw materials, how to do? It's okay, I'll lend you money

The transaction above only involves two parties, and in real life there may be a multi-party situation, which will be much more complicated...

Today's picture is just the simplest one, in fact, there are many kinds of letter of credit business, but all the changes are not the same, you just need to remember that there are various industries have a variety of needs, and the risk of each situation is different, the charges are naturally different.

And who would easily let go, any opportunity to make money, so this business can be less?

And who would easily let go of any opportunity to make money?