If you’re engaged in international trade, you know how complex and time-consuming the payment process can be. That’s where Documentary Collection comes in – it’s a trade finance method that can help simplify your international transactions and reduce risk.
When using Documentary Collection:
- The seller ships the goods to the buyer and sends the shipping documents, such as the bill of lading, to their bank (known as the “remitting bank”).
- The remitting bank then sends the documents to the buyer’s bank (known as the “collecting bank”) with instructions for payment.
- The collecting bank releases the shipping documents to the buyer once they have paid for the goods.
Documentary Collection is a relatively simple and cost-effective way to conduct international trade transactions, as it doesn’t involve the same level of paperwork and regulation as other trade finance methods such as Documentary Credit/Letters of Credit. However, it does carry some level of risk for both the buyer and the seller, as payment is made based on shipping documents rather than an independent guarantee of payment.
How it Will Work for You (Seller):
1. You and your trading partner agree to use Documentary Collection for your transaction.
2. You ship the goods to your trading partner and send the shipping documents to us.
3. We forward the documents to your trading partner’s bank and request payment.
4. Your trading partner’s bank releases the shipping documents to them once payment is received.
5. Your trading partner can then use the shipping documents to claim the goods.
Letters of Credit
International trade is a challenging exercise that comes with its risks and rewards. For a successful trade transaction, trust and financial support are paramount – that is where Documentary Credit/Letters of Credit are important.
Documentary Credit/Letters of Credit are bank-issued guarantees to the seller (exporter) that the Bank will settle payments in this trade transaction, upon required conditions being met. Conditions may include the presentation of specific shipping documents or proof of shipment by a certain date.
Here’s How it (Generally) Works:
- The buyer arranges for a Letter of Credit to be issued by their bank (known as the “issuing bank”).
- Once the seller ships the goods and presents the required documents to their bank (known as the “advising bank”), the advising bank forwards the documents to the issuing bank.
- The issuing bank verifies that the documents meet the specified conditions and releases payment to the seller.
Our Documentary Credit/Letters of Credit promotes trust between trading partners, and provides the essential funding back up for buyers (importers). We support the buyer (importer) by guaranteeing to the seller (exporter) that Kina Bank will settle the payment request upon satisfaction of trade terms/agreements.
Terms and conditions of the Documentary Credit/Letters of Credit will be customised to your needs. Our experienced team can guide you through the process and provide valuable insights into global markets. Contact us today to learn more about our trade finance services, and how we can help you grow your business with confidence.
How it Will Work for You (Buyer):
1. You and your trading partner agree to use Documentary Credit/Letters of Credit for your transaction.
2. Kina Bank issues a letter of credit on your behalf, which guarantees payment to your trading partner once the specified conditions are met.
3. Your trading partner ships the goods to you and sends the shipping documents to us.
4. Kina Bank verifies documents, and then forwards it to you.
5. Upon your acceptance documents, payment is made – depending on conditions set forth in the trade agreements.