Ex-Banker Advisory Ahmedabad, Gujarat
+91 9664500277 smecfoservices@gmail.com
Trade Finance & Global Procurement

Letter of Credit (LC) Advisory & Structuring

Advisory and syndication of Inland & Foreign Letter of Credit facilities to secure raw material procurement, optimize working capital cycles, and expand international vendor credit.

Limit Quantum
₹50 Lakhs – ₹100+ Crores
Opening Commission
From 0.40% / Qtr
Tenure Range
30 to 180 Days Usance
Applicability
Inland & Foreign Import
Strategic Trade Finance

Optimize Trade Credit & Cash Flows with Structured LC Lines

In manufacturing and bulk trading (textiles, chemicals, plastics, metals, engineering, agri-commodities), liquidity is heavily consumed by upfront raw material purchases. A structured Letter of Credit (LC) mechanism enables enterprises to purchase materials from domestic suppliers or overseas manufacturers without depleting cash reserves.

Led by ex-bankers CA Rochak Jain and Yogesh Patel, SME CFO Services structures custom inland and foreign trade credit envelopes (interchangeable LC, CC, and Bill Discounting sub-limits) tailored to your operational cycle and inventory holding period.

Letter of Credit Structures & Specifications

LC Structure Application Scenario Credit Tenor Key Operational Advantage
Inland Sight LC Domestic raw material purchases from Tier-1 suppliers & PSUs Immediate upon document presentation Higher supplier trust and cash discount advantages
Inland Usance LC Domestic purchases requiring deferred payment terms 30, 60, 90, 120 Days Suppliers discount bills; buyer gets interest-free credit window
Foreign Import LC (FLC) Importing raw materials, chemicals, or capital machinery from overseas Up to 180 Days (Raw Materials) / 3 Yrs (Capital Goods) Governed by international UCP 600 rules & foreign exchange hedging
Revolving LC Continuous ongoing purchases between established trade partners Auto-reinstated on settlement Eliminates the cost and friction of repeated separate issuances

Eligibility Criteria for LC Facility Sanction

Buyer / Importer Profile
  • Operational Track Record: Minimum 3 years in manufacturing, distribution, or import trade.
  • Turnover Benchmark: Annual gross sales exceeding ₹5 Crores.
  • IEC Code: Valid Import-Export Code (for international trade LCs).
  • Credit Score: CMR 1–4 rating with clean banking operations and zero statutory defaults.
Financial & Security Norms
  • Inventory & Creditor Holding: Raw material consumption cycle aligned with proposed LC tenor.
  • Current Ratio: Minimum 1.25:1 benchmark.
  • Cash Margin: 10% to 20% in the form of Fixed Deposit lien.
  • Primary Security: Hypothecation of raw materials/goods procured under the LC.

Mandatory Document Checklist

Corporate & Financial Profile:
  • Company PAN, GSTIN, MOA/AOA, and IEC Certificate.
  • Last 3 years Audited Financials with Tax Audit Report.
  • CMA Data detailing domestic & foreign procurement cycles.
  • Last 12 months Bank Statements of all operative accounts.
  • Sanction letters of all running fund and non-fund facilities.
Trade Contract Details:
  • Proforma Invoice / Purchase Order / Sales Contract.
  • Supplier / Beneficiary bank details (Swift Code, IBAN, IFSC).
  • Port of Loading & Discharge (for import LCs).
  • List of required shipping documents (BL/AWB, Packing List, CO).
  • Collateral property deeds for mortgage security.

Ex-Banker Trade Advisory: Discrepancy Prevention

Over 65% of international LC delays occur due to technical document discrepancies (discrepant Bill of Lading descriptions, late shipment, missing inspection certificates). Our team reviews your draft proforma contracts and sets up rigorous LC terms to guarantee seamless document acceptance and avoid steep discrepancy penalty fees.

Frequently Asked Questions

A Letter of Credit (LC) is a financial instrument issued by an issuing bank guaranteeing that the buyer's payment to the seller will be received on time and for the correct amount, provided all compliant trade shipping documents (Bill of Lading, Invoice, Inspection Certificate) are presented under UCP 600 rules.

We structure Sight LCs (immediate payment on document presentation), Usance/Deferred LCs (30 to 180 days credit tenor), Inland LCs for domestic raw material procurement, Import / Foreign LCs for global machinery/goods import, Revolving LCs, and Transferable LCs.

Under Usance LC Bill Discounting, the supplier's bank discounts the accepted LC draft and pays the supplier upfront minus nominal interest (at benchmark SOFR / MCLR rates), allowing the buyer to enjoy 90–180 days credit while the supplier receives immediate liquidity.

Cash margins typically vary from 10% to 20% Fixed Deposit based on the company's credit rating and existing banking relationship. We help established manufacturing and trading businesses secure low 10% cash margin lines combined with secondary real estate collateral.

LC opening charges typically range from 0.40% to 1.25% per quarter (or part thereof) depending on the tenure, whether inland or foreign currency, and the corporate credit profile.

We analyze your raw material procurement cycle, prepare bank-compliant CMA data and projected trade flows, select optimal PSU/private banks with robust global correspondent networks, and negotiate opening commissions and minimal collateral coverage.

Trade & Debt Advisory Services

Letter of Credit (LC) Bank Guarantee (BG) Export Credit Finance Working Capital (CC/OD) Loan Against Property (LAP)
Structuring an LC Facility?

Speak directly with former commercial trade credit heads in Ahmedabad.

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