The proper utilization of financial instruments, such as a Letter of Credit (LOC) or a Bank Guarantee (BG), can assist you to simplify your business operations.
In this article we would like to speak about 5 ways to leverage financial instruments to generate and facilitate large banking transactions.
Using a Letter of Credit (LOC) can ease the process of a large delivery of goods or services rendered: Several commodity operators who purchase and sell physical good require an LOC to be able to conduct business with sellers and buyers.
These LOC’s reduce the exposure associated with processing large transactions where a participant is taken on delivery or is delivering goods such as commodities.
Using a Bank Guarantee (BG) to establish new business relationships: When starting to operate with new distributors, suppliers, business partners, or offshore companies a BG may be a terrific tool to ensure the transaction takes place.
Increasing transaction security: A BG or LOC allows the investors and participants to substantially increase the security of the transaction.
Mitigating the risk of a counterparty default: In a large transaction the possibility of the counterparty not holding their side of the business represents a significant risk to the parties involved. This is a main reason why large companies and individuals utilize financial guarantees to reduce their risk within a transaction.
Increase the size of your business transactions by using a financial instrument to back your business: Several investors and financial institutions will require you to have a BG before they permit you to enter a transaction with them. Therefore, the growth of your business may be subject to your ability to obtain financial instruments on a timely manner.
We hope that this email was able to enrich your knowledge about how business finance services can increase your dividends by offering you better terms and rates for your next business deal.
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