Export letters of credit
Export letters of credit are a key financial instrument to help exporters alleviate risk and guarantee payment. In this video, Hanna Abraham discusses how exporters can make the most of export letters of credit, including how exporters can extend payment terms to their customers and still receive faster payment.
Lori Crever: Hi. I'm Lori Crever and today, I'm joined by Hanna Abraham, relationship manager with Wells Fargo International Trade Services. We're going to talk about export letters of credit. Hanna, thank you so much for stopping by today.
Hanna Abraham: Thanks for having me, Lori.
Lori Crever: Let's start by looking at, what are the basic international payment methods?
Hanna Abraham: There are actually four international payment methods. They are cash in advance, which is the preferred option for exporters, open account which is preferred option for importers, letters of credit, and documentary collections.
Lori Crever: Tell me about the basic values of an export letter of credit.
Hanna Abraham: The basic and main value of an export letter of credit is to assist buyers and sellers when transacting globally to help alleviate the risk and guarantee payment.
Lori Crever: As an exporter, how may I get paid faster while at the same time reducing my international payment risk?
Hanna Abraham: There are many ways as an exporter to get paid faster and alleviate risk. Due to the interest rate arbitrage play, an exporter may extend terms to their customer under a letter of credit where the exporter can then discount the letter of credit and pass on the fees to the buyer. This solution enhances the exporter's days sales outstanding and helps provide terms to the buyer. It's a win-win solution for both buyer and seller. Also by having Wells Fargo add confirmation, it helps alleviate foreign political and commercial risk.
Lori Crever: Hanna, why should I select Wells Fargo as my partner to help me enhance my international sales?
Hanna Abraham: Great question, Lori. So, conducting business internationally may be a bit challenging especially when you're not familiar with the players. It is assuring to know that Wells Fargo has over 44 offices outside of the U.S. and over 4,000 correspondent banker relationships worldwide.
Lori Crever: That is very helpful, indeed. Hanna, thank you so much for coming by today to share your expertise. If you'd like to learn more about how to position your company for success in the global marketplace, talk to your Wells Fargo International Trade Services relationship manager.