Benefits to the Importer
- Helps local importers gain access to cheaper foreign funds close to LIBOR rates as against local sources of funding which are costly compared to LIBOR rates.
- Availability of cheaper funds for import of raw materials and capital goods.
- Ease short-term fund pressure as able to get credit.
- Importer can make the payment at sight to the exporter and command a better price in terms of cash discount
Benefits to the Supplier
- Realize at-sight payment
- Avoid the risk of importer’s credit by making settlement with LC
We shall study about this article further, in detail, in our next post.