Letter of Credit Issuance
We have a situation where a contract has been issued to a contractor who is obtaining $825,000 worth of product overseas for one of our capital projects. The supplier is requesting we issue a Letter of Credit to guarantee payment upon receipt of the goods. We are being told this is normal practice for out of country purchases of substantial value.
Our intent is to pay for the product when it is received, there is no need for borrowing.
We've never issued a letter of credit and are finding the process quite cumbersome with our bank and also quite costly.
Has anyone else out there had any experience with this or able to offer any advice?
Thanks very much